Annual Report (ESEF) • May 6, 2022
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Download Source FileUntitled Annual Report 2021 Company: Park Street A/S Svanevej 12 DK-2400 København NV CVR no.: 12 93 25 02 LEI no.: 213800VGJC18MRKMZC33 Registered office: Copenhagen, Denmark Phone: +45 33 33 93 03 Internet: www.nordicom.dk / www.psnas.com E-mail: [email protected] Board of Directors: Anita Nassar, Chairman Andrew John Essex La Trobe Claes Peter Rading Ohene Aku Kwapong Pradeep Pattem Management: CEO Pradeep Pattem Auditor: PriceWaterhouseCoopers Statsautoriseret Revisionspartnerselskab Main activity: Park Street is a fully integrated European real estate investment and asset management company with offices in Copenhagen and London. It owns and manages a large portfolio of commercial properties located across Denmark. Annual General Meeting: Annual General Meeting to be held April 25th, 2022 at 10:00 at Svanevej 12, 2400 Copenhagen NV, Denmark. Annual Report 2021 1 Contents Directors' report 2 Directors' report 2 Subsequent events after December 31, 2021 3 Outlook and strategy for 2022 4 Financial Highlights 12 Financial Results 13 Risk Factors 18 Statutory Report CSR 18 Legal requirements for Corporate Governance 19 Statutory report on diversity in management 19 Management composition and remuneration 20 Board of Directors and Management 21 Shareholder structure 23 Group structure as of December 31, 2021 24 Statements 25 Statement by Board of Directors and Management 25 Independent auditors report 26 Consolidated Financial statements 30 Income statement 31 Statement of comprehensive income 32 Statement of financial position 33 Statement of equity 35 Statement of cash flows 37 Notes 38 Annual accounts for Park Street A/S 69 Income statement 70 Statement of comprehensive income 71 Statement of financial position as of December 31 72 Statement of equity 74 Statement of cash flows 75 Notes 76 Property Overview 94 Park Street/ Director’s report 2 Main Activity Park Street is a fully integrated European real estate investment and asset management company with offices in Copenhagen and London. It owns and manages a large portfolio of commercial properties located across Denmark. Results of the year 2021 Park Street result analysis primarily uses the term EBVAT (Earnings before value adjustments and tax) to measure the Group’s operating results. In 2021, Park Street achieved EBVAT of DKK 56.9 million (2020: DKK 69.8 million), for the period. The EBVAT achieved is DKK 12.9 million lower than the one in 2020. The decrease is mainly caused by the reduction of net sales partly compen- sated by the reduction of operating expenses, overheads and financial expenses. The evolution of the EBVAT is influenced by the following factors: Gross profit in 2021 is DKK 117.4 million (2020: DKK 125.0 million), equivalent to a decrease of DKK 7.6 million. The reduction in gross profit is primarily due to a reduction in rental income (- DKK 2.5 million) and other income (- DKK18.0 million) primarily due to the sale of properties, intentional vacancy in order to intiate residential projects and a delay on filling vacancies due to the uncertainties caused by Covid-19, partially offset by a reduction in external consulting expenses relating to properties (-DKK 5.2 million) and service costs (- DKK 4.8 million) and an increase in income received from the hotels in the group (DKK 2.9 million). The Group's overheads were DKK 34.7 million in 2021 against DKK 29.4 million in 2020. The increase of DKK 5.3 million is caused by a an increase in external advisor expenses and expensing the intangible asset value relating to software expenditure. Net financial items amounts to DKK -25.9 million in 2021 against DKK -25.8 million in 2020, representing a negative change of DKK 0.1 million driven by an increase in the debt with financial institutions including development loan for Pulse N with higher margins interest rates. Net Profit of the period is DKK 145.4 Million in 2021 (2020: DKK 145.3 million) due to the following effects: Fair value adjustment in 2021 with a net of DKK 128.9 million while the fair value adjustment in 2020 had a net effect of DKK 79.5 mil- lion. In both periods an evaluation of the domicile and investment properties have been made adjusting the yield and the estimated prof- it and loss by the entire portfolio of Park Street A/S and subsidiaries. In 2021, the sale of two non-core and stabilized properties which generated a profit of 1.5 million DKK (2020: DKK 38.5 million). The Group's equity as at 31st December 2021 was DKK 1,217 million, compared to DKK 1,071.9 million as at 31 December 2020. The improve- ment in the Group's equity is due to the profit for the period. The operation of the Group's properties in 2021 was impacted by the restraint shown by businesses to commit to leases and investment, which has delayed closings of some new leases. We also further received some long expected terminations. The current vacancy rate (calculated by rental value) for the Group's investment properties at 22.2% in 2021, against 22.1% for all of 2020. There are several pending discussions from 2021 with potential tenants should lead to a highly intensive period of concluding new leases and reducing the vacancy levels. During the first months of 2022, there has been a positive traction with the signature of new leases. Property acquisitions and sales In 2021, Park Street sold the following properties and plots: Residential unit in Ballerup Land plot in Naestved Park Street/ Director’s report 3 Organisation Since April of 2021 when the Annual General Meeting of the Company took place the Board of Directors of Park Street consists of Andrew La Trobe, Pradeep Pattem, Ohene Aku Kwapong, Anita Nassar and Claes Peter Rading. The number of employees of Park Street were 26 by the end of 2021, against 38 at the start of the year. Subsequent events after December 31, 2021 An investment property in Loftborvej has been sold in January 2022. Significant leases for over 3,800 square meters have been signed since January 2022. The Company has announced buyback program for Class A and Class B shares. From the balance sheet date until the date of presentation of this Annual Report no additional events have occurred other than the abovemen- tioned which significantly affects the assessment of the annual report. Park Street/ Director’s report 4 Outlook and Strategy for 2022 Background 2021 The last 2 years of disruption has reinforced the secular shift towards service and technology driven segments of Real Estate. It also challenged the concept of need for "Space" to work or shop while enhancing the needs for the "Space" to live. Managed Youth Housing & Collaborative Workspaces will thrive and outperform in the Real Estate market in the next 2-3 years. Strong balance sheet with 40% of Equity Ratio, well above our long-term target of 35% Estimated EBVAT of DKK 56.9m is lower than our target, significantly impacted by one off financing related costs and limited closing of new leases All Short-Term loan has been repaid with only Long-Term financing the portfolio Initiated Pulse N development with institutional development financing in place. Successful launch of Pulse O with full occupancy well ahead of target Park Street/ Director’s report 5 Portfolio Strategy 2022 After an indepth review of the portfolio, the portfolio of our assets are now classidied into three buckets with clear associated strategy. Strategy Spark Office Number of Assets 16 Debt (DKK) 553,705,564 Book Value (DKK) 929,841,576 Net Operating Income 2021 (DKK) 32,090,366 Stabilized Potential Rental Value (DKK) 70,159,088 Strategy Spark Retail Number of Assets 22 Debt (DKK) 399,392,717 Book Value (DKK) 663,089,742 Net Operating Income 2021 (DKK) 38,164,267 Stabilized Potential Rental Value (DKK) 53,984,249 Strategy Pulse Number of Assets 16 Debt (DKK) 560,663,040 Book Value (DKK) 1,217,145,167 Net Operating Income 2021 (DKK) 33,865,502 Stabilized Potential Rental Value (DKK) 78,742,173 () Stabilized Potential Rental Value is defined to be the full potential rental value upon full occupancy of the properties after completion of any required redevelopment works and capital expenditure. Park Street/ Director’s report 6 Park Street/ Director’s report 7 Asset Management 2022 To strengthen the two pillars: Pulse Living – Youth Housing Concept (scaling up stage) Spark Offices – Collaborative Office Hubs (prototype stage) Invest and Develop large assets in key cities (12 Assets/ hubs currently) Exit assets not part of Core Strategy: Asset with limited scale, regional locations, and in Retail only segment will be exited 34 assets planned for exit currently Over next 3 years Reduce portfolio size with targeted exits of assets – projecting over DKK 400m of Property Sales Reduce Debt with the sale proceeds – projecting over DKK 200m of Debt Reduction Enhance Leasing activity across portfolio to compensate for reduced assets and improve efficiencies Initiate Pulse T development Shares buy back program towards return of capital in view of asset disposal plans Targeted reinvestment of Capital from sales towards Pulse Living expansion * We have concluded sales of over DKK 100m in January 2022 Park Street/ Director’s report 8 The Pulse Vision Youth Housing – Simplified vibrant communities In the next 5 years we aim to reach 10 cities, each with 2-4 centres. That is 1,000 residents in 2 years and onwards to 5,000 residents. Pulse Living Experience @PulseO At present, 77% enquiries are through the website and email, 13% from Facebook, 3% through listing sites . At pulseliving.dk Site sessions 7,916 Unique visitors 4,545 Avg. session duration 5m 18s Scaling with Design & Technology End-to-end Real Estate technology platform for leasing, governance, financial reporting, property management, and administration Park Street/ Director’s report 9 A close-knit thriving international community Customer Testimonials “I love it here in Tåsingegade 29! Accommodation is very good for the price and the management are super helpful.” “Nice space! I rented a Studio plus and the bathroom is quite spacious than most studio apartments I have seen in CPH. ” Park Street/ Director’s report 10 The Spark Vision Prototyping a platform for the future in the next 12 months Localised hubs of managed office spaces 1. Best in class administration focused on tenant satisfaction 2. Curated high quality service options available 3. Each location as a hub promoting community empowered with local ecosystem 4. International collaboration throughout all locations, sharing common spaces and more At sparkoffices.dk Park Street/ Director’s report 11 At Park Street we are excited to scale up PulseLiving.dk & shape SparkOffices.dk over the next years, while facili- tating an exit for assets which will fit better with alternative owners. We look forward to a year of significant value creating activity Redeploy own capital along with long term Capital Partners into Pulse Strategy Exit assets to release capital to facilitate a focussed strategy and return of capital to shareholders via share buybacks At Park Street, we will Invest in Core Strategy and exit from non-aligned asset portfolios Strive for Efficient Operations across all portfolios and improve profitability Create Technology based solutions to rapidly scale Continue to stay Financially Strong Invest in the Bright Passionate Team Park Street/ Director’s report 12 Financial Highlights Key figures Amounts in DKK 1000s 2021 2020 2019 2018 2017 Income statement Rental income 124,328 126,903 147,518 149,729 140,678 Total net sales 158,264 172,669 203,166 175,444 167,657 Gross profit 117,418 124,979 150,093 146,154 132,106 Profit from primary operations 187,225 187,759 146,021 142,341 392,800 Financial items -25,881 -25,757 -29,105 -33,409 -73,397 Earnings before value adjustments and tax (EBVAT) 56,866 69,813 83,223 84,014 25,902 Profit for the period 145,459 145,321 115,053 108,289 360,137 Statement of financial position Investment properties 2,615,015 2,462,633 2,477,996 2,304,614 2,255,395 Investments in property, plant and equipment 25,803 36,991 19,257 2,650 11,702 Balance sheet total 3,020,749 2,723,066 2,772,843 2,580,698 2,488,782 Interest-bearing debt 1,509,471 1,405,024 1,633,364 1,590,916 1,783,271 Total equity 1,217,038 1,071,946 931,133 810,652 554,947 Statement of cash flows Cash flows from operations 57,999 61,966 92,856 87,930 32,377 Cash flows from investment -17,777 137,919 -125,487 51,825 24,885 Cash flows from financing 104,447 -238,341 39,927 -94,668 -116,556 Other disclosures Non-current liabilities as a proportion of total liabilities (%) 95.7 94.1 89.7 94.1 82.7 Share capital 67,513 67,513 67,513 67,513 42,853 Share price, end of period (DKK) 9.00 10.00 6.65 6.7 5.8 Share price change in points -1.00 3.35 -0.05 0.9 4.5 Dividend per share 0.0 0.0 0.0 0.0 0.0 Number of employees in the Group (average) 26 26 32 27 23 Financial ratios 2021 2020 2019 2018 2017 Return on property portfolio (% p.a.) 4.3 4.7 5.8 5.9 5.5 Average loan rate (% p.a.) 1.8 1.8 1.8 2.0 3.7 Return margin on property portfolio (% p.a.) 2.5 2.9 4.0 3.9 1.8 Return on equity (%) 11.9% 13.6% 12.4% 13.4% 64.9% Equity ratio (%) 40.3% 39.4% 33.6% 31.4% 22.3% Net asset value per share, end of period (DKK) 18.0 15.9 13.8 12.0 13.0 Earnings per share (avg. Number of shares) (DKK) 2.2 2.2 1.7 1.7 21.3 Earnings per share, end of period (DKK) 2.2 2.2 1.7 1.6 8.4 Result of continuing activities per. share (kr.) 2.2 2.2 1.7 1.6 8.4 Dividend yield (%) 0.0 0.0 0.0 0.0 0.0 Price/net asset value, end of period 0.4 0.0 0.5 0.6 0.4 Cash flow per share (DKK) 0.9 0.9 1.4 1.4 1.9 The above financial ratios are calculated in accordance with the definitions in note 22 to the parent company financial statements in the Annual report for 2021. Park Street/ Director’s report 13 Financial Results Yearly result compared to expected development The Group achieved in 2021 an EBVAT (profit excluding value adjustments and tax) of DKK 56.8 million, which is marginally lower than the guidance mentioned in the interim report for the first half of 2021, in view of Covid-19 related disruption to leasing activity. Segment Information Park Street does not present segment information and the Group’s portfolio is presented as one. Operation from Investment Properties The Group's investment properties at December 31, 2021 is composed of all the Group's 52 properties, excluding 2 properties classified as domicile property The Group's investment properties are geographically concentrated in Greater Copenhagen and Zealand. Based on investment property values, the portfolio allocates as follows: Amount in Million DKK 2021 2020 Zealand 1,825 69% 1,664 68% Bornholm 38 1% 38 2% Fyn 249 9% 231 9% Jutland 524 20% 529 21% Total 2,636 2,462 Park Street/ Director’s report 14 The breakdown by activity based the property value is split as follows: Amount in Million DKK 2021 2020 Residential 515 20% 339 14% Residential Project 470 18% 394 16% Office 842 32% 701 28% Retail 692 26% 907 37% Hotel 92 3% 89 4% Storage 26 1% 32 1% Total 2,636 2,462 The following table shows the calculated average vacancy divided by property types: Average vacancy in % 2021 2020 Retail 19.3% 18.4% Office () 30.8% 31.0% Residential 10.8% 13.7% Storage 39.9% 42.9% Others 0.0% 0.0% Total 22.2% 22.1% () Office vacancies include a potential re-development project in an asset located in Odense. The following table shows the calculated average gross rent obtained divided by property types on properties held at 31 December 2020: Avg. gross rent per sqm p.a. (DKK) 2021 2020 Retail 1,184 826 Office 969 867 Residential 2,256 1,188 Storage 405 337 Other 924 430 Total 907 808 Park Street/ Director’s report 15 Consolidated Financial Review PROFIT AND LOSS Park Street's Net Profit is DKK 145.4 million for 2021 (2020: DKK 145.3 million), equivalent to a change of DKK 0.1 million in relation to 2020. As mentioned above the EBVAT in 2021 is DKK 56.9 million (2020: DKK 69.8 million), which is DKK 12.9 million lower than the one achieved in 2020. The reduction is primarily driven by the reduction of the gross profit (DKK -7.6 million), due to a reduction in rental income (- DKK 2.5 million) and other income (- DKK18.0 million) primarily driven by the sale of properties, intentional vacancy in order to intiate residential projects and a delay on filling vacancies due to the uncertainties caused by Covid-19. This has partially been offset by a reduction in external consulting expenses relating to properties (-DKK 5.2 million) and service costs (- DKK 4.8 million) and an increase in income received from the hotels in the group (DKK 2.9 million). Net Profit of the period is DKK 145.4 Million in 2021 (2020: DKK 145.3 million) due to a higher revaluation of the investment properties amounting to DKK 128.9 Million (2020: DKK 79.5 Million). Additionally, the sale of two non-core stabilized properties have generated a profit of 1.5 million DKK while in 2020 the sale of assets generated DKK 38.5 million. To finalize, the effect of the Tax on profit is lower in 2021, being DKK 41.8 Million in 2021 (2020: DKK 42.4 Million) due to a relatively lower increase in fair value adjustments. BALANCE SHEET Park Street's balance sheet total as at 31 December 2021 was DKK 3,020.7 million, an increase of DKK 297.7 million on the balance sheet total at 31 December 2020. The increase is mainly due revaluation of investment and domicile properties of DKK 128.9 million and acquisition and im- provements of assets by DKK 25.8 million. Additionally there was an increase in current assets of DKK 149.8 million (from DKK 57.4 million at 31 December 2020 to DKK 207.2 million at 31 December 2021) due to proceeds from sale of investment properties, financing and re-financing activi- ties. Non-current assets were DKK 2,813.6 million at 31 December 2021 (31 December 2020: DKK 2,665.7 million). The Group's equity as at 31st December 2021 was DKK 1,217.0 million, compared to DKK 1,071.9 million as at 31 December 2020. The improve- ment in the Group's equity is due to the profit for the period. Liabilities to credit institutions were DKK 1,509.5 million at 31 December 2021 (31 December 2020: DKK 1,405.0 million), consisting of DKK 1,488.4 million (99%) for non-current liabilities and DKK 21.1 million (1%) for current liabilities. In 2021, financial liabilities were increased by DKK 104.4 million driven by increase in debt and amortization repayments to credit institutions. CASH FLOWS FOR 2021 Cash flows from operating activities for 2021 were DKK 58.3 Million (2020: DKK 62.0 million), equivalent to a decrease of DKK 3.7 million in rela- tion to the same period last year. The decrease is primarily due to the decrease of operating profit (EBIT) previously mentioned. Cash flows from investing activities for 2021 were DKK -17.8 million (2020: DKK 137.9 million). Cash flows from investing activities were lower compared to the previous year due to larger sale of assets in 2020 as compared to 2021 (2021: DKK 8.0 million, 2020: DKK 192.8 million). There was lower improvements made to investment properties of DKK -25.8 million (2020: DKK -36.9 million). Cash flows from financing activities for 2021 were DKK 168.1 million (2020: DKK -238.3 million) mainly driven by new financing (DKK 211.4 Mil- lion), and the remaining amount corresponds to amortization repayments to credit institutions. The Group's liquid assets amounted to DKK 168.1 million at 31 December 2021 against DKK 23.1 million at 31 December 2020. Park Street/ Director’s report 16 Uncertainty in connection with recognition and measurement In connection with the Annual report, management makes a number of estimates and assessments regarding the carrying amount of assets and liabilities, including: Fair value of investment properties, Fair value of domicile properties, Impairment test on domicile properties, Classification of properties, Deferred tax assets and tax liabilities Because of assumptions, assessments and estimates, uncertainty relates to the mentioned conditions and items. It may be necessary to change previously made estimates, etc. due to changes in the circumstances underlying the estimate, changed strategy or due to additional information, further experience or subsequent events. Reference is made to note 1 of the consolidated financial statements and note 1 in the parent company's financial statements for further discussion of the assumptions, assessments, estimates and associated uncertainties. Parent company Park Street A/S For the parent company Park Street A / S, profit before tax amounts to DKK 188.9 million in 2021 (2020: DKK 188.0 million). The parent company's profit and loss before tax is affected by a gain of DKK 54.3 million (2020: loss of DKK 26.2) from subsidiaries. Parent company equity per 31 December 2021 amounts to DKK 1,219.1 Million (31 December 2020: DKK 1,071.9 million). Risk factors Financial Risk The financial management of the Group is geared towards optimising the term structure of liabilities in line with the Group's operations and mini- mizing the Group's financial risk exposure. It is part of the Group's policy not to conduct speculative transactions by active use of financial instru- ments, except to manage the financial risks inherent to the Group’s core activities. The Group is exposed to various financial risks due to its activities, including liquidity risk, market risks (primarily interest rate risk) and credit risk. Park Street regularly reviews the Group's risk profile in the areas of greatest risk, as per above description on page 2 and on the Consolidated Financial Statements Note 1 and 28. Other financial risks Park Street financial risks are described in the consolidated financial statements, Note 28 and includes a description of the following compo- nents: Liquidity risk Refinancing risk Liquidity risk management Interest rate risk. Credit risk. Capital management. Refer to the information in Note 28. Park Street/ Director’s report 17 Business risks Park Street is subject to normal commercial and societal risks applicable to players in the Danish real estate market. Park Street's significant business risks can be divided into the following categories: Properties market value Market Rent Vacancy Maintenance Sales of properties Errors and omissions concerning the renovation and new construction. Properties market value Park Street values investment properties at fair value (market value) and includes valuation adjustments in net profit. Park Street's portfolio of properties constitute a large share of the Group's balance sheet, which means that sensitivity to falling prices in the property market is relatively large. Property value is influenced by several factors, including a particular value sensitivity to fluctuations in the following parameters: i. Market rent ii. Vacancy iii. Yield Estimated changes in the properties' fair value changes of the parameters above are disclosed in note 1 to the consolidated financial statements. Market Rent Some of the properties in Park Street’s portfolio have leases which were either entered into or renegotiated during the tough markets of 2009 to 2014. The Group has an opportunity to review these leases to migrate the lease levels closer to market rents. Improving demand for space and increasing market rents could also give an opportunity to make capital investments on structurally vacant areas of the portfolio to create further lettable areas. Renegotiating with existing tenants could create the risk of increased vacancy, which in turn will create a need for further capital investment re- quirements for upgarading the vacant space. Vacancy Park Street is dependent on the ability to maintain or create a natural user requirement for the properties. In the case of a tenant's relocation of a lease, there is a risk that the vacant lease cannot be re-leased within the expected time horizon or, if nec- essary, can only be leased at lower rent level than expected. In addition, vacancy rates are affected by the general economic situation in the area where the individual property is situated. Maintenance The basis for obtaining rental income is, of course, that Park Street can offer leases that meet the expectations and requirements of the tenants, including a satisfactory maintenance condition for the property. Lack of maintenance of properties therefore creates a risk to Park Street. Lack of maintenance can be due to many conditions, such as structural deficiencies, unforeseen wreckage, vandalism, extreme weather conditions, etc. The company prepares long term maintenance budgets and carries out the maintenance work necessary to maintain a satisfactory maintenance condition on the properties. Sales of properties Park Street sells properties that are suitable to sell. The selling price is naturally linked to uncertainty as it depends on the actual negotiation situa- tion at the time of sale and is also influenced by a number of other factors, including the rental income of the property, the general interest rate level and market conditions at the time of sale. Park Street/ Director’s report 18 Errors and deficiencies regarding rebuilding and newbuilding When rebuilding the existing properties of the Group, or in the case of new construction, there is a risk of malfunctioning. Park Street ensures against this through contracts with the Group's suppliers (contractors, etc.) who will be required to correct any deficiencies. In cases where suppli- ers have gone bankrupt or for some reason cannot fill their obligations, Park Street may, however, have to rectify defects at your own expense, provided there is no guarantee or other security from the suppliers. Other risks Other risks can be divided into the following categories: Insurance risks. Tax risks. Legal risks. IT risks. Insurance risks Park Street subscribes to statutory insurance and insurance policies that are deemed to be relevant and customary. The Group regularly conducts an insurance review with the assistance of an insurance specialist. Based on the latest report on company’s insurance coverage, management believes that Park Street has sufficient insurance coverage. Tax risks Changes in tax legislation may affect Park Street's fiscal situation. Legal risks Park Street regularly enters into a number of agreements, including agreements concerning the operation of properties. The agreements involve opportunities and risks, which are assessed and hedged in connection with the conclusion of the agreements. IT risks Park Street uses IT to a considerable extent and are thus exposed to operational disruption of the established IT safety. This can cause operating and financial losses. Park Street constantly works to ensure a high level of IT security, which is currently estimated to be the case. Statutory report CSR Business model Please, refer to the section Main Activity on page 2. Risks related to CSR While Park Street generally and based upon our business model has not identified nor experienced any material risks in relation to CSR, the Company’s business model is exposed to potential risks in the following areas, which require ongoing attention across the way we manage our buildings Environment and Climate: Increasing energy prices and suboptimal energy performance of the buildings will have a direct impact on the costs borne by our current and prospective tenants. This could impact both the ability to retain the current tenants, their ability to pay the required costs and also the ability to procure new tenants. Human Resources: Denmark, our main jurisdiction of operations sets a high and positive bar for the quality of work environment, work safety and overall work conditions. It also has high demand for talent in our industry, and there is a risk of not attracting the right required talent if the work environment and conditions do not meet the high standards. Human Rights: The business model requires certain functions of managing buildings to be outsourced to external vendors. There is a risk that the vendors might not have stringent standards to meet requisite human rights legislations to the detriment of our own goals. Anti-Corruption and Bribery: The zero-tolerance policy requirement within the company is exposed to the external vendor’s own stringent im- plantation of similar approach and could expose the company to unwarranted actions outside company’s control. Park Street/ Director’s report 19 The Company has decided to author and implement policies with respect to environment, climate change, human rights, social and employee conditions and anti-corruption due to our social responsibility in each of the business activities that are performed. CSR is reflected in the way we manage and refurbish our properties, in our relationship with tenants, employees, business partners and any stakeholder that the Group operates with. Policies, activities and results Environmental and climate conditions: The Company has is set to follow consistently high standards for following all applicable building regulations including AB 18 and ABT 18 across its projects. The Company has further set goals of changing metering technology for fa- cilitate dynamic measurement of energy reading which will allow us to take steps for improving the energy performance for the build- ings. The Group invested DKK 30.0 million in the maintenance and modernization of the existing properties. The Company will maintain high standards and ambitions of a continuous improvements for energy consumption and Co2 emissions decrease in the following years. Social conditions and employee relations and respect for human rights: Employees are the most important resource for progress, and therefore the Group is constantly working to ensure a healthy physical and mental work environment with a focus on reducing sickness absence. Park Street supports all human rights within national laws as well as international laws, and acknowledges the importance of supporting the local community as well as helping in a larger perspective. In order to support the data protection for individuals, the Group is implementing and continuously improving processes and IT measures to meet the EU GDPR standards. At the same time a policy is getting established for development of future employees. No breach of these policies has been identified in 2021. The Compa- ny will continue to maintain high standards for work environment meeting and going well above the requirements of legislation to be able to attract the best talent. Anti-corruption and bribery: The Group is working on stablishing an Anti-corruption policy were employees and business partners are not allowed to receive gifts from suppliers larger than DKK 500. In connection with the ongoing controlling of employees, the Group has strict guidelines on only paying bills according to legal documents with documented expenses, and that prices are benchmarked against usual costs. No corruption has been detected in 2021. Going forward the company will maintain zero-tolerance approach to any form of corruption or bribery and seek similar commitments from its key vendors. Computer ethics: The Park Street Group does not have a formalized policy on data ethics. Park Street only processes data for business purposes. Park Street does not make use of new technologies such as artificial intelligence, advanced algorithms, monitoring and the like. Data processed in Park Street is not made available to third parties. Should there be a desire to make data available to third par- ties, it should be approved by the company's top management. The Park Street Group complies with applicable legislation for the pro- cessing of personal data. As a rule, the Group does not process personal data, apart from what relates to employee data. Legal requirements for corporate governance Park Street has chosen on the company's website to publish the statutory statement of business management, according to section § 107b of the Danish Financial Statements Act (Årsregnskabslovens § 107b.). The full statutory report available on our website http://www.psnas.com/index.php/corporate-governance-statement/ Statutory report on diversity in management Park Street board composed at the time of publication of the annual report for 2021 by four men and one woman. In accordance with the Danish Commerce and Industry Agency's (Erhvervsstyrelsens) "Guidelines on targets and Policies for Gender Composition of Management and Report- ing on this issue" issued in March 2016, Park Street has a sub-representation of the board (top Management body). Park Street has set a target for the underrepresented gender in the Board of Directors (top Management body). Park Street has chosen that the under-represented sex must be represented by 40% of the board by the end of 2022. Consequently the goal of 40% women in the Board of Direc- tors has not been met yet as no candidates of the underrepresented gender were up for election in the previous year. Since the number of employees in the Group is less than 50, Park Street is not required to develop policies to increase the proportion of under- represented gender in the Group's other management levels, however the percentage of female employees represents 48% of the employees in the Group by the end of 2021. Group’s overall policy is to employ or promote the best suitable candidates no matter of gender. Internal control and risk management systems in relation to the accounting process Park Street Board of Directors and the Audit Committee have the overall responsibility for risk management and internal controls in relation to the presentation of the Group financial statements. The Group’s internal control and risk management systems relating to the accounting process are designed to minimise the risk of irregularities and significant errors in the published financial statements. Park Street/ Director’s report 20 The Board of Directors / Audit Committee regularly assess material risks and internal controls in order to ensure that the control environment of Park Street provides a good risk management and effective internal control. At least once a year, as part of risk assessment, the Board of Directors / Audit Committee and the Executive Board undertake a general identifica- tion and assessment of risks in connection with the financial reporting, including the risk of fraud, and consider the measures to be implemented in order to reduce or eliminate such risks. The Board of Directors is overall responsible for the Group having information and reporting systems in place to ensure that its financial reporting is in conformity with rules and regulations. For this purpose, the Company has set out detailed requirements in policies, manuals and procedures. The internal control and risk management systems are monitored at different levels within the Group. Any weaknesses, control failures and viola- tions of the applicable policies, manuals and procedures or other material deviations are communicated upwards in the organization in accordance with relevant policies and instructions. Any weaknesses, omissions and violations are reported to the Executive Board. The auditors elected by the Annual General Meeting account for any material weaknesses in the internal control systems related to financial report- ing in the Auditor’s Long-form Report to the Board of Directors. Minor irregularities are reported in Management Letters to the Executive Board. The Group has no change of control affecting the Annual Report. Management composition and remuneration The management of Park Street consist of the following: Board Directors Executive Board Appointed / Employee Expiry of electoral term Age Shareholding at the beginning, number of shares Share buy in the year, number of shares Shareholding at the end of the year Independence Sex Board of Directors Andrew LaTrobe 2017 2022 56 0 0 0 Not Independent M Pradeep Pattem ()() 2016 2022 45 0 0 6,722,484 1) Not Independent M Ohene Kwapong 2016 2022 60 0 0 0 Independent M Anita Nassar()() 2016 2022 59 0 0 0 Independent F Claes Peter Rading 2021 2022 59 0 0 0 Independent M () Anita Nassar holds the position of chairman of the Board () Pradeep Pattem holds the position of CEO of the Company () Pradeep Pattem holds controlling rights in Park Street Nordac Sarl through Park Street Asset Management () Anita Nassar hold shares in Park Street Nordac Sarl without controlling rights 1) Acquired via Park Street Asset Management Ltd. Remuneration to the Board of Directors and Executive Board The purpose of the Group's remuneration, including any incentive remuneration, is to attract and retain the group's management skills and pro- mote the management incentive to realize Park Street’s objectives and create value in and for the company. A remuneration policy has been prepared that describes the guidelines for defining and approving remuneration for the members of the Board of Directors and the Executive Board. The remuneration policy approved at the company's general meeting and is available on www.nordicom.dk and www.psnas.com. The board members receive a fixed monthly fee. The Chairman receives DKK 250,000 annually, the Vice Chairman of the Board (currently va- cant) receives DKK 150,000 annually, and other Board members receive DKK 100,000 annually. In addition, the Chairman of the Audit Committee receives DKK 75,000 annually and other members of the Audit Committee receive DKK 50,000 annually. Park Street/ Director’s report 21 The remuneration for the members of the Board of Directors in 2021 is shown in Note 5 of the consolidated financial statements. Salary and employment conditions for the Executive Board are set at least once a year by the Board of Directors. The salary consists of fixed salary, without bonus and pension. In addition, the Executive Board receives free telephone, etc. Total wage package is composed so that the fees are set at a competitive level, taking into account the competencies and efforts of the Executive Member and the results achieved. Reference is made to note 5 of the consolidated accounts regarding remuneration to the Executive Board. Board of Directors and Management Pradeep Pattem (Indian Citizen), Director and CEO Pradeep Pattem is a graduate engineer from the Delhi Institute of Technology and has an MBA from the Indian Institute of Management, Calcutta. As the founder and CEO of Park Street Advisors Limited, Pradeep has advised and implemented investments in across Europe since its estab- lishment in 2014. Pradeep previously had a position as Managing Director, Head of Credit & Mortgage Markets for Europe and Asia in the Royal Bank of Scotland (RBS). In connection with the employment in RBS, Pradeep also held senior positions as a member of the Global Trading Man- agement Committee, the Chairman of the Strategic Investments Committee and the Chair of Credit & Mortgage Risk and Compliance Committee. Management Positions Park Street Asset Management Limited, England. Park Street Advisors, England. Pulse Taastrup P/S, Denmark. Pulse Glostrup P/S, Denmark. Director positions CEO of Park Street A/S, Denmark. Phoam Studio ApS PSN ApS Pulse Living ApS Andrew LaTrobe (UK citizen, chairman) Andrew LaTrobe graduated with a Bachelor of Commerce degree from Rhodes University in South Africa, and then completed a Diploma in Social Studies at Oxford University and a MSC (Industrial Relations) at London School of Economics, as a Rhodes Scholar. He has been a director of Park Street Advisors since December 2014 with responsibility for operations, asset management and corporate governance. Previous corporate experience includes seven years working in a variety of client coverage and transaction execution roles at Royal Bank of Scotland (RBS), and twelve years with Standard Bank Group, working out of Johannesburg, London and Singapore. Management Positions Park Street Asset Management Limited, England. Park Street Advisors, England. Park Street UK Limited, England Xplore Markets Limited, England. Pulse Taastrup P/S, Denmark. Pulse Glostrup P/S, Denmark. Director positions Enviro Options Holdings (Pty) Ltd, South Africa Swindon Ground Lease Limited, England Sthenos International Limited, England Ohene Aku Kwapong (US citizen, Ghanaian citizen) Ohene Aku Kwapong is a graduate of Massachusetts Institute of Technology’s (MIT) Sloan School of Management, Cambridge, Massachusetts, with MBA in Financial Engineering and also studied Chemical / Nuclear Engineering at MIT. He holds a PHD in Non-linear Systems Dynamics from Park Street/ Director’s report 22 Columbia University, New York. Ohene Aku has previously held senior positions at Exxon Mobil, Deutsche Bank London, Senior Manager at Microsoft Corporation, VP at GE Capital, Senior Vice President at the New York City Economic Development Corporation, Senior VP at Deutsche Bank in New York, and COO EMEA Credit at Royal Bank of Scotland in London. Since 2014, Ohene Aku has been engaged in consultancy in restructuring and launched The Songhai Group, a corporate development company. Management Positions Managing Partner, The Songhai Group, US. Director positions Ecobank Ghana, Risk and Governance Committees. The Practice School, an executive management skills company. Trustee, Head of State Award Scheme – Ghana. Anita Nassar (formerly Kamal) (French citizen) Anita Nassar holds a bachelor's degree in business administration from the American University of Beirut. Anita is the founder of 'Alternative Con- sultant Group'. Ms Nassar is Partner and Senior Managing Director at Balyasny Asset Management. She is also a member of BAM’s Management Committee. Anita joined BAM from Citadel where she was a Partner and Managing Director serving Europe, the Middle-East, Africa and Asia Pacific. Prior to joining Citadel, Anita served at Merrill Lynch, London as Managing Director, Co-Head of Government Institutions Sales. Previously, she worked at HSBC London as Managing Director, Global Head of Government Sales, serving Asia, Europe, and the Americas. Management Positions Founder and CEO at Alternative Consultant Group. Partner, Senior Managing Director at Balyasny Asset Management. Director positions Board of Trustees at Northeastern University, Boston, USA. Endowment Trustee in the Funds and Investments Subcommittee at Northeastern University, Boston, USA. Claes Peter Rading (Swedish citizen) Peter Rading is a Swedish citizen who graduated with a Bachelor of Science in Business Administration Summa Cum Laude from Georgetown University DC in 1986. He worked for Royal Bank of Scotland Plc from 1990 to 2013, running multiple complex global businesses for the bank between 2000 and 2013, when he then retired from the bank and the banking industry. His final position at the bank was as Global Co-Head of Trading and included his serving on the Investment Bank executive committee, the Markets division management committee and as Chair of the bank’s technology board. Since his departure from Royal Bank of Scotland Plc in 2013, Peter has actively focused on private investment activity in the real estate sector, including an active involvement in the Nordics and high growth specialist real estate sub-sectors. Management positions: Seequestor, UK Telios Capital Holdings, UK Board Observer, UK IP Nexus, US LocalCircles India Pvt Ltd, India Director positions: Elwyn Green Ltd Kamo River Investments Ltd Telios Holdings Ltd Tillingbourne (Canterbury) Ltd Tillingnourne (Horham) Ltd Park Street/ Director’s report 23 Shareholder structure Shareholders above 5% In percent Park Street Asset Management Ltd. 92.14% The number of registered shareholders amounts as of 31 December 2021 to 913 pcs. (December 31, 2020: 990). The registered shareholders represent per 31 December 2021 99% of the share capital (31 December 2020: 99%). All Park Street A / S shares are listed on Nasdaq Copenhagen and are part of the Small Cap segment. The share price ended 31 December 2021 at price 14.1 (31 December 2020: 10.00), which is an increase of 4.1 points in relation to the share price per share as of 31 December 2020. The market value of Park Street A / S constitute as of 31 December 2021 169.59 million (31 December 2020: DKK 120.28 million). Appointment of board members Rules of appointing and replacing members of the board of directors are included in the section 13.1 of the articles of association. Rules for changing articles of association Park Street A/S articles of association can be changed by a General Meeting in accordance with the Companies Act §§106 and 107. Resolution on amendment of the Articles of Association are only valid if the resolution is approved by at least 2/3 of both voting rights and percentage of equity which are present at the meeting. Own shares Information about treasury shares is shown in note 23 of the consolidated financial statements. Dividends The performance the Company during 2021 was impacted to a certain extent by COVID-19 related disruption with lower than expected top line revenue. However, in view of tighter cost control the performance was in line, though at lower end of the expectations. The Board of Directors deems it prudential to propose to the Annual General Meeting that no dividend will be paid for the financial year 2021. Investor Relations It is Park Street's policy to inform quickly about relevant matters. The Executive Board informs shareholders and investors according to guidelines agreed with the Board, and it is the goal to meet the information obligations of Nasdaq Copenhagen each time. It is part of Park Street's information policy to: publish interim reports, issue annual reports, and provide quick responses to inquiries to the group. Share capital DKK 67,513,372 Nominal share amount DKK 1 Number of shares 67,513,732 shares Share Classes DKK 12,027,858 A-shares Listed DKK 55,485,874 B-shares Not listed Number of votes per share One Bearer Yes Restriction on voting rights No Limitations on transferability No ISIN DK0010158500 Stock Exchange Nasdaq Copenhagen Park Street/ Director’s report 24 Stock exchange announcements in 2021 and 2022 Date Title 08-01-2021 Park Street Nordicom A/S – Share buyback program 27-01-2021 Park Street Nordicom A/S – Share buyback program 27-01-2021 Park Street Nordicom A/S – Share buyback program 29-01-2021 Park Street Nordicom : Strategy 2021 04-02-2021 Park Street Nordicom A/S – Share buyback program 15-02-2021 Park Street Nordicom A/S – Share buyback program 23-02-2021 Park Street Nordicom A/S – Share buyback program 26-02-2021 Park Street Nordicom A/S – Share buyback program 25-03-2021 Park Street Nordicom A/S – Annual Report 2020 01-04-2021 Park Street Nordicom A/S – Annual General Meeting 2021 22-04-2021 Park Street Nordicom A/S – Notification regarding the course of the ordinary general meeting 26-08-2021 Park Street A/S – Interim Financial Report, 1st half of 2021 30-09-2021 Park Street A/S has signed long term debt facilities of DKK 619 million and is also launching the Pulse Nørrebro project 04-02-2022 Park Street A/S : 2022 Strategy 25-02-2022 Park Street A/S – New share buyback program 07-03-2022 Park Street A/S – New share buyback program 16-03-2022 Park Street A/S – New share buyback program Financial Calendar 04-02-2022 2022 Strategy Update 01-04-2022 Annual Report 2020 25-04-2022 Ordinary General Meeting 26-08-2022 Half year report 2022 30-03-2023 Annual Report 2022 21-04-2023 Ordinary General Meeting More info Further information on company and shareholder matters and the Group's activities can be found on Park Street's website www.nordicom.dk and www.psnas.com Inquiries regarding the Group's relations with investors and the stock market can be addressed to: CEO: Pradeep Pattem Tel.: + 45 33 33 93 03 E-mail: [email protected] Group structure at December 31, 2021 The Group structure at December 31, 2021 consists of the company Park Street A/S and the fully owned subsidiaries Pulse Taastrup P/S, Pulse Glostrup P/S, Pulse N P/S, Pulse O P/S, Ballerup Hotel P/S, Svanevej P/S, Toldbuen P/S, PS Holdco I P/S, Phoam Studio ApS, PSN ApS, Pulse Living ApS, Albuen ApS, PS I ApS, and Park Street UK. Information on investment is disclosed in note 8 of the parent company's financial statements. All subsidiaries are fully consolidated in the consoli- dated financial statements of Park Street A/S. Park Street/ Statements 25 Statement by Board of Directors and Management The Board of Directors and management have today considered and adopted the annual report for the financial year 1 January - 31 December 2021 for Park Street A/S. The annual report is prepared in accordance with International Financial Reporting Standards as adopted by the EU, and further requirements in the Danish Financial Statement Act and rules for listed companies. In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group and the Parent's financial position as at 31 December 2021 and of the results ofthe Group's and the Parent Company’s operations and cash flows for 2021. It is also our opinion that the directors' report contains a true and fair account of the development of the Group's and the parent company’s activi- ties and financial conditions, the profit for the period and the Group's and the Parent Company’s financial position as a whole, and a description of the significant risks and uncertainty factors that the Group and the Parent Company faces. In our opinion, the annual report of Park Street A/S for the financial year 1 January to 31 December 2021 with the file name 213800VGJC18MRKMZC33-2021-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. The annual report is submitted to the Ordinary General Meeting for approval. Copenhagen 1 April 2022 Management Pradeep Pattem CEO Board of Directors Anita Nassar Pradeep Pattem Chairman Ohene Aku Kwapong Claes Peter Rading Andrew John Essex La Trobe 26 Independent Auditor’s Report To the shareholders of Park Street A/S Report on the audit of the Financial Statements Our opinion In our opinion, the Consolidated Financial Statements and the Parent Company Financial Statements give a true and fair view of the Group’s and the Parent Company’s financial position at 31 December 2021 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January to 31 December 2021 in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act. Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors. What we have audited The Consolidated Financial Statements and Parent Company Financial Statements of Park Street A/S for the financial year 1 January to 31 December 2021 comprise income statement and statement of comprehensive income, statement of financial position, statement of equity, state- ment of cash flows and notes, including summary of significant accounting policies for the Group as well as for the Parent Company. Collectively referred to as the “Financial Statements”. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the Financial State- ments section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark. We have also fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. To the best of our knowledge and belief, prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided. Appointment We were first appointed auditors of Park Street A/S on 27 April 2017 for the financial year 2017. We have been reappointed annually by share- holder resolution for a total period of uninterrupted engagement of 5 year, including the financial year 2021. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements for 2021. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Valuation of Investment Properties and Domiciles The Group owns a portfolio of investment properties that are valued at fair value and 2 domiciles that are revalued to fair value at 31 December 2021. Valuation of investment properties and domiciles at fair value contains significant estimates based on significant assumptions, where even minor changes in the assumptions can have a significant effect on the fair value of the properties. Management has used the capitalisation method to determine the fair value. The model is descripted in note 1.2, with market rent, vacancy and yield being the most significant assumptions. Management has obtained valuations from an external valuer to support the We assessed the method used by management to measure the fair value of investment properties and domiciles, and we challenged the assumptions applied, using our knowledge of the real estate market and professional scepticism. We assessed the competencies and independence of external valuer used by Management. We assessed and tested on a sample basis the data inputs used to determine fair value, including market rent and yields, by comparing the valuation made by Man- agement with the valuation made by the external valuer 27 fair value determined by Management; including the assumptions used, with market rent and yield being the most significant assumptions. We focused on this area as valuation of investment properties and domiciles at fair value is based on significant estimates which are subjective and a high degree of estimation uncertainty. Refer to note 1.2,9, 14 and 15. and comparable trades. We tested on a sample basis the calculation for the fair values including the assumptions used and the related disclosures in the notes. Statement on Management’s Review Management is responsible for Management’s Review. Our opinion on the Financial Statements does not cover Management’s Review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the Financial Statements, our responsibility is to read Management’s Review and, in doing so, consider whether Management’s Review is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Moreover, we considered whether Management’s Review includes the disclosures required by the Danish Financial Statements Act. Based on the work we have performed, in our view, Management’s Review is in accordance with the Consolidated Financial Statements and the Parent Company Financial Statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement in Management’s Review. Management’s responsibilities for the Financial Statements Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and further requirements in the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, for- gery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstanc- es, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. Conclude on the appropriateness of Management’s use of the going concern basis of accounting and based on the audit evidence ob- tained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our con- clusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or the Parent Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 28 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independ- ence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest bene- fits of such communication. Report on compliance with the ESEF Regulation As part of our audit of the Financial Statements we performed procedures to express an opinion on whether the annual report of Park Street A/S for the financial year 1 January to 31 December 2021 with the filename 213800VGJC18MRKMZC33-2021-12-31-en.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the annual report in XHTML format and iXBRL tagging of the Consolidat- ed Financial Statements. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: ● The preparing of the annual report in XHTML format; ● The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to ele- ments in the taxonomy, for all financial information required to be tagged using judgement where necessary; ● Ensuring consistency between iXBRL tagged data and the Consolidated Financial Statements presented in human-readable format; and ● For such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of procedures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: ● Testing whether the annual report is prepared in XHTML format; ● Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; ● Evaluating the completeness of the iXBRL tagging of the Consolidated Financial Statements; ● Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; ● Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and ● Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements. In our opinion, the annual report of Park Street A/S for the financial year 1 January to 31 December 2021 with the file name 213800VGJC18MRKMZC33-2021-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Hellerup, 1 April 2022 PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab CVR no 3377 1231 Torben Jensen Morten Jørgensen State Authorised Public Accountant State Authorised Public Accountant mne18651 mne32806 29 30 2021 CONSOLIDATED FINANCIAL STATEMENTS Park Street | CONSOLIDATED Financial Statements 31 Income statement Note Amounts in DKK 1000s 2021 2020 3 Net sales 158,264 172,669 4 Operating expenses -40,846 -47,690 Gross profit 117,418 124,979 5 Employee benefit expenses -17,808 -17,977 6 Other external expenses -12,532 -8,540 7 Depreciation, amortisation and impairment -4,330 -2,891 Operating profit (EBIT) 82,748 95,570 8 Financial expenses -25,881 -25,757 Earnings before value adjustments (EBVAT) 56,866 69,813 9 Adjustment to fair value, net 128,887 79,463 10 Gains realised on the sale of investment properties 1,472 38,483 Profit before tax 187,225 187,759 11 Tax on profit for the period -41,767 -42,438 Profit for the period 145,459 145,321 Distributed as follows Parent's shareholders 145,459 145,321 Profit for the period 145,459 145,321 12 Earnings per share, average number of shares 2.19 2.19 12 Diluted earnings per share, average number of shares 2.19 2.19 Park Street | CONSOLIDATED Financial Statements 32 Statement of comprehensive income Note Amounts in DKK 1000s 2021 2020 Profit for the period 145,459 145,321 Other comprehensive income: Items that cannot be reclassified to the income statement: Fair value adjustment of domicile properties -503 7,041 Tax on fair value adjustment of domicile properties 111 -1,549 Other comprehensive income after tax -392 5,492 Comprehensive income for the period 145,066 150,813 Distributed as follows Parent's shareholders 145,066 150,813 Comprehensive income for the period 145,066 150,813 Park Street | CONSOLIDATED Financial Statements 33 Statement of financial position Note Amounts in DKK 1000s 2021 2020 ASSETS Non-current assets Intangible assets 13 Software 1,865 3,671 1,865 3,671 Investment property and Property, plant and equipment 14 Domiciles 194,000 196,298 15 Investment properties 2,615,015 2,462,633 16 Machinery and equipment 490 792 2,809,506 2,659,723 Financial assets 17 Investment in associates 2,029 2,029 Deposits 186 279 2,215 2,308 Total non-current assets 2,813,585 2,665,703 Current assets 18 Current financial assets at amortised cost 7,671 8,000 19 Project holdings 0 0 20 Receivables 23,973 17,202 Income tax receivable 5,038 4,403 Prepaid expenses and accrued income 2,662 4,609 21 Cash and cash equivalents 167,820 23,151 Total current assets 207,163 57,364 Total assets 3,020,749 2,723,066 Park Street | CONSOLIDATED Financial Statements 34 Statement of financial position Note Amounts in DKK 1000s 2021 2020 LIABILITIES Equity Share capital 67,513 67,513 Revaluation reserve 52,920 55,107 Share Premium 289,260 289,260 Accumulated profit 807,345 660,067 22,23 Total equity 1,217,038 1,071,946 Liabilities Non-current liabilities 24 Deferred tax 232,087 191,733 25 Borrowings 1,488,364 1,354,054 Deposits 5,163 7,769 1,725,614 1,553,556 Current liabilities 26 Provisions for liabilities 400 400 25 Current borrowings 21,107 50,970 Trade and other payables 7,718 3,988 Income tax payable 1,267 4,549 Deposits 33,367 24,732 Other liabilities 14,238 12,926 78,097 97,565 Total liabilities 1,803,711 1,651,121 Total equity and liabilities 3,020,749 2,723,066 Park Street | CONSOLIDATED Financial Statements 35 Statement of equity Amounts in DKK 1000s Share capital Revaluation reserve Accumulated profit Share Premium Equity Total Statement of equity for 2021: Equity as at 1 January 2021 67,513 55,107 660,066 289,260 1,071,946 Comprehensive income for the period Profit for the period 0 145,459 0 145,459 Fair value adjustment of domicile 0 -503 0 0 -503 Tax on other comprehensive income 0 111 0 0 111 Other comprehensive income during the financial year 0 -392 0 0 -392 Comprehensive income for the period 0 -392 145,459 0 145,066 Transactions with owners Repurchase treasury shares 0 0 25 0 25 Total transactions with owners 0 0 25 0 25 Other adjustments Depreciation of revalued value of domiciles 0 -1,795 1,795 0 0 Total other adjustments 0 -1,795 1,795 0 0 Equity as at 31 December 2021 67,513 52,920 807,345 289,260 1,217,038 Park Street | CONSOLIDATED Financial Statements 36 Amounts in DKK 1000s Share capital Revaluation reserve Accumulated profit Share Premium Equity Total Statement of equity for 2020: Equity as at 1 January 2020 67,513 51,177 523,182 289,260 931,133 Comprehensive income for the period Profit for the period 0 0 145,321 0 145,321 Fair value adjustment of domicile 0 7,041 0 0 7,041 Tax on other comprehensive income 0 -1,549 0 0 -1,549 Other comprehensive income during the financial year 0 5,492 0 0 5,492 Comprehensive income for the period 0 5,492 145,321 0 150,813 Transactions with owners Repurchase treasury shares 0 0 -10,000 0 -10,000 Total transactions with owners 0 0 -10,000 0 -10,000 Other adjustments Depreciation of revalued value of domiciles 0 -1,563 1,563 0 0 Total other adjustments 0 -1,563 1,563 0 0 Equity as at 31 December 2020 67,513 55,107 660,066 289,260 1,071,946 Park Street | CONSOLIDATED Financial Statements 37 Statement of cash flows Note Amounts in DKK 1000s 2021 2020 Operating profit (EBIT) 82,748 95,570 Adjustment for illiquid operating items, etc. 4,330 2,891 Change in operating capital 5,204 -6,380 Cash flows concerning primary operations 92,282 92,081 Financial income received 895 0 Financial expenses paid -29,902 -25,757 Paid Corporate Tax -5,275 -4,358 Total cash flow from operating activities 57,999 61,967 Cash flow from investing activities Improvements to investment properties -25,803 -36,991 Sales of investment properties 8,026 192,805 Purchase of intangible assets 0 -3,249 Purchases of other property, plant and equipment 0 -14,645 Total cash flow from investing activities -17,777 137,919 Cash flow from financing activities Repurchase treasury shares 0 -10,000 Proceeds from borrowings 503,306 0 Repayment of liabilities to credit institutions -398,859 -150,831 Repayment of debt from disposal of assets 0 -77,510 Total cash flow from financing activities 104,447 -238,341 Total cash flow for the period 144,669 -38,455 Liquid assets as at 1 January 23,151 61,606 Liquid assets at the end of the period 167,820 23,151 Liquid assets at the end of the period Cash and cash equivalents 167,820 23,151 Liquid assets at the end of the period 167,820 23,151 38 Summary Note 1 Accounting policies, accounting estimates and risks, etc. Note 2 Segment information Note 3 Net sales Note 4 Operating expenses Note 5 Employee benefits expenses Note 6 Auditor’s fees Note 7 Depreciation, amortisation and impairment Note 8 Financial Expenses Note 9 Adjustment to fair value, net Note 10 Gains realised on the sale of investment properties Note 11 Tax on profit for the year and other comprehensive income Note 12 Earnings per share Note 13 Intangible assets Note 14 Domiciles Note 15 Investment properties Note 16 Machinery and equipment Note 17 Investment in associates Note 18 Current financial assets at amortised cost Note 19 Project holdings Note 20 Receivables Note 21 Cash and cash equivalents Note 22 Share capital Note 23 Own shares Note 24 Deferred taxes Note 25 Borrowings Note 26 Provisions for liabilities Note 27 Contingent assets and liabilities Note 28 Financial risks and use of derivative financial instruments Note 29 Non-current operating items, etc. Note 30 Change in operating capital Note 31 Related parties Note 32 Subsequent events Note 33 Accounting policies 39 Notes Note 1 - Accounting policies, accounting estimates and risks, etc. Note 1.1. – Basis of preparation a. Accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. Refer to note 33 for a full description of the accounting policies used. The company presents its annual report in compliance with reporting class D. b. Changes to accounting policies Accounting policies are unchanged from the previous year. Note 1.2. – Investment properties A property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property. An investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. After initial recognition, an investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for differences in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods, such as recent prices on less active markets or discounted cash flow projections. The fair value of an investment property reflects, among other things, rental income from current leases and other assumptions market participants would make when pricing the property under current market conditions. Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised. Changes in fair values are recognised in the income statement. Investment properties are derecognised when they have been disposed. Where the Group disposes of a property at fair value in an arm’s length transaction, the carrying value immediately prior to the sale is adjusted to the transac- tion price, and the adjustment is recorded in the income statement within net gain from fair value adjustment on investment property. The principles and methods for determining the estimated fair value of the properties in this category is based on the capitalisation method. The determination of fair values in accordance to the capitalisation method is generally the most accepted and widely used model for valuating property. The method is based on a stabilised net rent, capitalised at a rate of return assuming a stabilised property in a stable market, which is fully let at an annual market rent at, or close to, market level. For non-stabilised properties, special conditions such as vacancy and refurbishment costs are taken into consideration. The model used contains the following main elements: 1 + Annual Rental Income (fully rented) 2 - Non-recoverable operating costs 3 = Net Operating Income (NOI) 4 - Cap rate (net initial yield) 5 = Market value before regulations and deposits 6 - Vacancy costs 7 - Refurbishment cost 8 - Rental loss (discounts, etc.) 9 + Net Present Value (NPV) of Overrented elements 10 - Net Present Value (NPV) of Underrrented elements 11 + Cash deposits 12 + Other 13 = Market value after regulations and deposits (Fair Value) 40 Ad. 1) The annual rental income represents the budget rent. For non-vacant units, the budget rent equals the actual rental income. If the actual rental income differs significantly, the market rent is used. For vacant areas, the market rent is used. Ad. 2) All operating expenses not recoverable from the tenants are deducted. This includes taxes, insurance, cleaning, utility costs, service sub- scriptions, administration, external maintenance etc. Ad. 4) The yield requirement is determined individually for each property based on the yield requirement for comparable properties in the same geographical area (where this is possible) and the property's risk profile. Ad. 6) Vacancy costs reflect the estimated loss of rental income until a re-letting is assumed. There is vacancy until the stablised level is reached. When the stabilised level is reached all properties are assumed fully let. Ad. 7) For vacant units, it is assumed that a refurbishment is required before a re-letting can take place. At some properties, these are not included as the leases already are ready for reletting. Ad. 8) Current discounts are deducted from the market value. Ad. 9) If an overrented lease is regulated to market rent, it is implemented over a 4-year period according to section 13 in the Danish Commercial Rent. As a result, the lease will generate an overrenting element in this period. Ad. 10) If an underrented lease is regulated to market rent, it is implemented over a 4-year period according to section 13 in the Danish Commercial Rent. As a result, the lease will generate an underrenting element in this period. . The calculation of the properties' fair value is sensitive to changes in all the above inputs to the valuation model. The most significant non- observable inputs used in calculating the current value of the completed investment properties are as follows: i. Market Rent per square meter (sqm.) per year ii. Vacancy iii. Yield A general increase in market rent per sqm and decrease of the vacancy in the areas in which Park Street's properties are located, will likely decrease the yield requirements. i. Market Rent per sqm per year Market rent per sqm per year represents an important input for calculating the fair value of the property. If it is estimated that the current rent is lower or higher than the rent that can be obtained by re-hire, a correction of the current rent will be made to the expected rent on re-hire. This input is based on an estimate. Similarly, input on market rent for empty areas is based on an estimate. The long-term average market rent (ie at terminal level) is the following divided by property types: Avg. gross rent per sqm p.a. (DKK) 2021 2020 Retail 1,184 826 Office 969 867 Residential 2,256 1,188 Storage 405 337 Other 924 430 Total 907 808 The estimated fair value is sensitive to changes in the estimated budget rent. The sensitivity of changes in the average budget rent per sqm are illustrated in the table below, which shows the effect on the fair value of the properties if only the average budget rent per change is changed sqm per year. 41 Change in market rent Change in market value (Million DKK) per sqm per year (DKK) 2021 2020 200 592 565 100 296 282 50 148 142 -50 -148 -141 -100 -296 -276 -200 -592 -545 The table shows that an increase in the market price of, for example 50 DKK per sqm per year will increase the completed investment proper- ties' fair value by DKK 148 million (31 December 2020: DKK 142 million). ii. Vacancy No structural vacancy has been considered in the property valuation; as it has been estimated that the current vacancy will be let within 6 to 12 months. An increase in the current vacancy has been estimated and represents the following (broken down by property types and calculated as estimated vacancy divided by the market rent in the terminal): Change in Vacancy Change in market value (Million DKK) (%-point) 2021 2020 10% -4 -2 5% -2 -1 -2% 1 1 -5% 2 2 The table shows that an increase in the vacancy by 5 percentage points will reduce the finished investment property with the fair value of DKK -2 Million (31 December 2020: DKK -1 million). iii. Yield The fixed return requirement is an essential input in estimating fair values. The table below shows the ranges for the return requirement divided by property type and the weighted return requirement in- for each property type. 2021 2020 Percentage p.a. Interval Weighted Avg Interval Weighted Avg Retail 5.92 – 8.75 7.64 6.00 – 8.75 7.44 Office 5.27 – 7.50 6.60 5.00 – 8.50 6.46 Storage 8.50 – 9.50 9.00 6.75 – 9.50 7.27 Residential 3.85 – 6.49 4.68 4.13 – 5.50 4.58 Others 5.50 – 6.50 5.92 6.50 - 6.75 6.51 Total 3.85 - 9.50 6.20 4.13 - 9.50 6.30 The table shows that the return requirements for completed investment properties at December 31, 2021 is in the range 3.85% - 9.50% per annum. The corresponding interval at December 31, 2020 amounted to 4.13% - 9.50% per annum. The weighted yield requirement in the table are calculated as each property yield requirements weighted by the property's fair value in relation to property type's / portfolio's fair value and amounts at December 31, 2021 6.20% per annum for the overall portfolio of finished investment proper- ties at December 31, 2020, the corresponding weighted return requirements for the entire portfolio 6.30% per annum. The yield requirements used have a significant impact on the fair value of the property. The sensitivity of changes in the return requirement is illustrated in the table below which shows the effect on the fair value of the properties if only the average return rate is changed. 42 Change in return requirements Change in market value (Million DKK) (% points) 2021 2020 1.00% -330 -285 0.75% -256 -221 0.50% -177 -152 0.25% -92 -79 -0.25% 99 85 -0.50% 207 201 -0.75% 325 302 -1.00% 455 412 The table shows that an increase in the rate of return of 0.25 percentage point would reduce the completed investment property fair value DKK - 92 million (31 December 2020: DKK -79 million). The breakdown by activity based the property value is split as follows: Amount in Million DKK 2021 2020 Residential 515 20% 339 14% Residential Project 470 18% 394 16% Office 842 32% 701 28% Retail 692 26% 907 37% Hotel 92 3% 89 4% Storage 26 1% 32 1% Total 2,636 2,462 Determining the fair value of Domicile properties From 2015 domicile properties have been evaluated at the amount equivalent to the fair value at the date of revaluation less depreciation, see mention in the note 33. Park Street possesses at 31 December 2021 the following two domiciles: Svanevej 12, Copenhagen NV (Park Street's headquarters in Copenhagen Nordvest neighborhood). Marbækvej 6, Ballerup (Hotel in Ballerup). When calculating the fair value of the above two domicile properties, principles and calculation methods are applied which are used to estimate the property's fair values. Due to different characteristics, different principles and calculation methods are used for each of the two domicile properties.The fair value of both owner-occupied properties is based on significant estimates. Changes in fair values are recognised in other comprehensive income statement. Domicile properties are derecognised when they have been disposed or transferred into investment property. The estimation of the properties’ fair value as of December 31, 2021 resulted in a revaluation of the properties’ book value by - DKK 0.5 million (31 December 2020: DKK 7.0 million), which is included under "Fair value adjustment of domicile properties" in other comprehensive income. i. Park Street domicile in Copenhagen Park Street's headquarters at Svanevej 12 in Copenhagen Nordvest neighbourhood is an office building that is partially used as domicile for Park Street and partly for rental. The property is characterized by generating a current return on rent, similar to the Group’s investment properties (see description above except that the property is also used as domicile for Park Street). Principles and methods for determining the property’s fair value is the same as the applied to Investment properties described above. Property estimated market rent and determining the required return on owner-occupied property is based on inputs from an independent valuer. The estimate of the property's fair value, similar to the Group's completed investment properties, is sensitive to changes in input in the valuation model. The most significant non-observable input used for estimating the fair value of the domicile property is as follows: 43 2021 2020 Market rent per sqm. per year (DKK) 1,200 1,240 Vacancy (%) 0 0 Return requirement (% p.a.) 5.26 5.25 The sensitivity to changes in the above non-observable input can be illustrated as follows (assuming the listed events occur one by one): An increase or decrease in the market price of DKK 50 per sqm per year will result in a change of the property's fair value, respectively DKK +3.8 million. (31 December 2020: DKK +3.8 million) and DKK -3.7 million (31 December 2020: DKK -3.7 million). An increase or a reduction of the required yield of 0.50% point will entail a change of the property's current value, respectively DKK -7.9 million (31 December 2020: DKK -7.8 million) and DKK +9.5 million (31 December 2020: DKK +9.4 million). A general increase in market rent per sqm and decrease in vacancy in the district, where the property is located, will likely cause a drop in the yield requirement. ii. Hotel in Ballerup Park Street hotel on Marbækvej 6 in Ballerup is a property where Park Street via a management agreement operates the hotel. This property is thus characterized by generating a current return operation from the property. In order to calculate the property's fair value separated from the hotel operations, the measurement of the property's fair value based on an estimate of market rent that could be obtained on a normal lease. The esti- mate of market rent is calculated as a fixed percentage of the revenue of the hotel. The estimate of the hotel’s expected revenue is based on budgeted stabilized revenue discounting a ramp up cost that equals the difference be- tween 2021 actual revenue and the stabilized budget revenue. Property estimated market rent and determining the required return on owner-occupied property is based on inputs from an independent valuer. The estimate of the property's fair value, similar to the Group's completed investment properties, is sensitive to changes in input in the valuation model. The most significant non-observable input used for estimating the fair value of the domicile property is as follows: 2021 2020 Market rent (% of expected revenue from the hotel) 35 33 Return requirement (% p.a.) 6.5 5.5 The sensitivity to changes in the above non-observable input can be illustrated as follows (assuming the listed events occur one by one): An increase or a reduction of the required yield of 0.50% point will entail a change of the property's current value, respectively DKK -4.0 million (31 December 2020: DKK -9.1 million) and DKK +5.0 million (31 December 2020: DKK +10.9 million). Classification of properties Park Street classifies the properties in the following categories: Domicile (Owner-occupied properties) Investment Properties Reference is made to note 33 in accounting policies for a more detailed description of how the properties are included in the above-mentioned classifications. Classification of properties takes place on the basis of Park Street's intentions with each land or property at the time of acquisition. If the future purpose for some reason is not finalized at the time of acquisition, the foundation is classified as an investment property. 44 In some cases, services may be provided to tenants, etc. that constitute significant benefits. Park Street owns and operates a hotel where services to guests form a significant part of the total product. The property is therefore classified as a residential property. Reclassification of properties between the above categories is made when the application is changed and a number of criteria are met. Notes to the individual financial statements indicate whether changes have been made to the classification regarding properties owned by Park Street. Deferred tax assets and liabilities Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates/laws that have been enacted or substantively enacted by the end of the reporting period. Tax assets arising from unused tax losses, are valued based on existing budgets and profit forecasts for a 3-year period. Tax is recognized for an unused tax loss carryforward or unused tax loss carryforward when it is considered probable that there will be sufficient future taxable profit against which the loss or credit carryforward can be utilised. At December 31, 2021 the Group has included unused tax losses of DKK 148 million (31 December 2020: DKK 165 million; 31 December 2019: DKK 206 million) all of which is estimated to be realized within a three-year period or against deferred tax liabilities. The reduction in unutilized losses in 2021 and 2020 is due to positive tax income. Determining the fair value of debt to credit institutions As stated on Note 25 the value of the Group’s mortgage debt and bank debt is classified as amortized cost. As stated in Note 25 Group's non-convertible bonds are recognized as liabilities towards credit institution and are recognized as at fair value based on data that is non-observable in the market. Note 2 – Segment information Park Street's property portfolio is managed under a single management makes no segmentation of the portfolio. Information on the Group's reve- nue to external customers is disclosed in note 3 below. The Group has no customers / tenants who make up more than 10% of the group's rental income. The group only has activities in Denmark. Note 3 - Net sales Amounts in DKK 1000s 2021 2020 Rental income 124,328 126,903 Sales of other services 33,041 45,179 Total sales of services 157,369 172,082 Interest income, mortgages and instruments of debt 895 587 158,264 172,669 Note 4 - Operating expenses Amounts in DKK 1000s 2021 2020 Operating expenses, investment properties 35,678 43,263 Operating expenses, other services 5,168 4,428 40,846 47,690 45 Note 5 – Employee benefits expenses Amounts in DKK 1000s 2021 2020 Salary 16,442 16,549 Contribution-based pensions () 862 958 Other social security costs 59 65 Other staff costs 445 406 17,808 17,977 Average number of employees 26 26 (*) The Group has only defined contribution plans. For defined contribution plans, the employer undertakes to pay a defined contribution to a pen- sion fund, but has no risk with regard to future developments in interest rates, inflation, mortality, disability, etc. as regards the amount to be paid to the employee. Remuneration to the parent company's CEO (Pradeep Pattem) comprises the following (): Salary 2,760 2,760 Contribution-based pensions 0 0 Bonus 0 0 2,760 2,760 The CEO is also considered as “Key Management” Remuneration to the parent company's board of directors constitutes the following (): Board members Pradeep Pattem (CEO) 100 100 Andrew LaTrobe (Member of the Audit Committee) 183 250 Ohene Kwapong (Chairman of the Audit Committee) 175 175 Lars-Andreas Nilsen (Member of the Audit Committee) (Jan-Apr 2021) 50 150 Anita Nassar (Chairman of the Board) 200 100 Claes Peter Rading (May-Dec 2021) 77 0 Per Høpfner 0 50 785 825 () Remuneration of the board of directors is disclosed on the Director’s report of the Annual Report. Note 6 – Auditor’s fees The auditor appointed in 2021 and 2020 is PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab. Their fees can be specified as follows: Amounts in DKK 1000s 2021 2020 Statutory audit 533 428 Other assurance services 148 0 Tax and VAT advice 264 177 Other services 38 109 983 714 Fees for non-audit services delivered by PricewaterhouseCoopers, Statsautoriseret Revisionspartnerselskab, include issuing assurance statement on opening balance in subsidiary and general accounting and tax advisory services. 46 Note 7 – Depreciation, amortisation and impairment Amounts in DKK 1000s 2021 2020 Depreciation, software 1,807 1,361 Depreciation, domicile properties 1,795 1,563 Depreciation, inventory and fixed assets 728 -32 4,330 2,891 Note 8 – Financial expenses Amounts in DKK 1000s 2021 2020 Interest expenses, liabilities to credit institutions measured at amortized cost 23,968 24,585 Other interest costs and fees 645 296 Borrowing costs 1,268 875 25,881 25,757 Note 9 – Adjustments to fair value, net Amounts in DKK 1000s 2021 2020 Fair value adjustment, investment properties 128,887 79,463 128,887 79,463 Note 10 – Gains realised on the sale of investment properties Amounts in DKK 1000s 2021 2020 Sales, investment properties 6,500 192,805 The property's carrying amount on sale etc. -5,028 -154,322 1,472 38,483 Note 11 – Tax on profit for the year and other comprehensive income Amounts in DKK 1000s 2021 2020 Annual tax can be divided as follows: Current tax on profit of the year 1,128 4,524 Current tax, previous years 59 160 Changes in deferred tax liabilities 0 0 Changes in deferred tax assets previous years 40,295 37,805 Changes in deferred tax liabilities previous years 0 -51 41,482 42,438 47 Amounts in DKK 1000s 2021 2020 Tax on profit for the year can be explained as follows: Estimated tax at a tax rate of 22% 41,190 41,307 Non-deductible costs 44 586 Non-taxable income 0 0 Adjustment of previous years taxes 73 545 41,306 42,438 Effective tax rate 22.06% 22.60% Note 12 – Earnings per share Amounts in DKK 1000s 2021 2020 Profit for the period 145,459 145,321 Parent company shareholders' share of profit for the year, used to calculate earnings per share 145,459 145,321 Average number of shares 67,513,732 67,513,732 Average number of own shares -1,037,804 -459,157 Average number of shares in circulation 66,475,928 67,054,576 Diluted average number of shares in circulation 66,475,928 67,054,576 Number of shares, end period 67,513,732 67,513,732 Number of own shares, end period -1,037,804 -1,037,804 Number of shares in circulation, end period 66,475,928 66,475,928 Diluted average number of shares in circulation 66,475,928 66,475,928 Earnings per share (average number of shares) (DKK) 2.19 2.17 Diluted results per. share (average number of shares) (DKK) 2.19 2.17 Note 13 – Intangible assets Amounts in DKK 1000s 2021 2020 Cost at 1 of January 5,421 2,172 Additions during the year 0 3,249 Cost at 31 December 5,421 5,421 Amortization at 1 January -1,749 -388 Amortization during the year -1,807 -1,361 Amortization at 31 December -3,556 -1,749 Balance at 31 December 1,865 3,671 48 Note 14 – Domiciles Amounts in DKK 1000s 2021 2020 Cost at 1 of January 208,689 201,648 Revaluation of value 0 7,041 Cost / Revaluated Value at 31 December 208,689 208,689 Depreciation and amortization at 1 January -12,391 -10,828 Revaluation of the domicile -503 0 Depreciation -1,795 -1,563 Depreciation and amortization at 31 December -14,689 -12,391 Balance at 31 December 194,000 196,298 Domicile properties consist of a hotel in Ballerup and Park Street’s headquarters in Copenhagen. As the property is presented as a domicile, depreciation is required in accordance with IAS 16. Assets are revaluated equal to fair value at the date of revaluation less accumulated depreciation and subsequent impairment losses. There have been revaluations both as of December 31, 2021 and December 31, 2020. Domicile properties are pledged as security for loans, mortgage loans and other credit institutions as stated in Note 18. Information on fair value hierarchy of Domicile property is as follows: Amounts in DKK 1000s Level 1 Level 2 Level 3 Total At 31 December 2021: Domicile property 0 0 194,000 194,000 0 0 194,000 194,000 At 31 December 2020: Domicile property 0 0 196,298 196,298 0 0 196,298 196,298 Classification of domicile properties in level 3 means that determining the fair value of domicile properties mainly based on data that are not ob- servable in the market. During the 2021 and 2020 there have been no transfers between levels of the fair value hierarchy. The fair value of domicile properties is based on estimates. Refer to note 1 for additional details. No domiciles have been acquired in 2021 and 2020. If Park Street domiciles were measured at the historical cost less accumulated depreciation, the book value would have been the following: Amounts in DKK 1000s 2021 2020 Domicile properties 115,833 117,628 115,833 117,628 49 Note 15 – Investment properties As of 31 December 2021 there are no ongoing sales processes regarding investment properties. Amounts in DKK 1000s 2021 2020 Balance at 1 of January 2,462,633 2,477,996 Transfer to / from project holdings - 1,628 Transfer to / from machinery and equipment - 5,216 Costs incurred for improvements 25,803 36,991 Adjustment to fair value, net 128,887 79,463 Acquisition of properties - 14,645 Depreciation of fixed assets 3,519 1,015 Retirement on sale -5,028 -154,322 Balance at 31 December 2,615,815 2,462,633 Fair value hierarchy for investment: Amounts in DKK 1000s Level 1 Level 2 Level 3 Total At 31 December 2021: Investment properties 0 0 2,615,815 2,615,815 0 0 2,615,815 2,615,815 At 31 December 2020: Investment properties 0 0 2,462,633 2,462,633 0 0 2,462,633 2,462,633 Classification of investment properties in level 3 means that determining the fair value of investment properties is mainly based on data that is not observable in the market. During 2021 and 2020 there has been no transfers between levels of the fair value hierarchy. The fair value of investment properties is based on estimates. Refer to note 1 for additional details. Total fair value adjustments on investment properties in the financial year are: Amounts in DKK 1000s 2021 2020 Investment properties 128,887 79,463 128,887 79,463 Total fair value adjustments amounts to DKK 128.9 million (2020: DKK 79.5 million) for the properties owned by the Company as of December 31, 2021. These value adjustments are recognized in the income statement as “Adjustments to fair value, net”. Investment properties are pledged as security for debt to mortgage banks and other credit institutions as indicated in Note 27. The Group does not have any agreement which required the Group to build or redevelop any properties neither in 2021 or 2020. The net income of the investment portfolio is as follows: Amounts in DKK 1000s 2021 2020 50 Rental income from investment properties 119,609 121,842 Operating expenses, investment properties -34,679 -42,098 Net income from investment properties 84,930 79,744 The Group has entered into operating leases (leases) to tenants of its investment properties. The leases duration is up to 15 years. The contract minimum payments under existing leases are distributed as follows: Amounts in DKK 1000s 2021 2020 Remaining termination within 1 year from the balance sheet date 30,956 80,608 Remaining termination between 1 and 5 years from the balance sheet date 90,311 120,944 Remaining termination after 5 years from the balance sheet date 88,762 53,272 210,029 254,824 Note 16 – Machinery and equipment Amounts in DKK 1000s IT Equipment Appliances Total Machinery and Equipment Cost at 1 of January 2021 4,247 8,484 12,731 Additions during the year 0 0 0 Disposals during the year -679 -4,199 -4,878 Cost at 31 December 2021 3,568 4,285 7,853 Amortization at 1 January 2021 -4,187 -7,752 -11,939 Amortization during the year 663 3,913 4,576 Amortization at 31 December 2021 -3,524 -3,839 -7,363 Balance at 31 December 2021 44 446 490 Cost at 1 of January 2020 4,164 8,356 12,520 Additions during the year 83 128 211 Disposals during the year Cost at 31 December 2020 4,247 8,484 12,731 Amortization at 1 January 2020 -4,099 -6,799 -10,898 Amortization during the year -88 -953 -1,041 Amortization at 31 December 2020 -4,187 -7,752 -11,939 Balance at 31 December 2020 60 732 792 Note 17 – Investment in associates The company acquired 150,000 units of common membership interest in the entity Enterra Solution, LLC (Address: One Palmer Square, Suite 530, Prince-ton, NJ 08542) in August 2019 as part of the strategy to develop a Real Estate Platform with Technology. This company is developing an 51 advanced AI (Artificial Intelligence) based system that allows organizations to capture, curate and analyse data which will help the Company to increase efficiency in the operations and simplify the processes. Amounts in DKK 1000s 2021 2020 Cost price at January 1 2,029 2,029 Additions 0 0 Cost price at December 31 2,029 2,029 Carrying amount at December 31 2,029 2,029 Note 18 – Current financial assets at amortised cost The Group has the following mortgage and debt instruments classified as "Financial assets measured at amortized cost": Amounts in DKK 1000s 2021 2020 Financial assets at amortized cost at 1 January 8,000 8,335 Repayment of the year -329 -335 Financial assets at amortized cost at 31 December 7,671 8,000 Mortgages and debt securities classified as financial instruments in the category "Financial assets at amortized cost" expire in the following periods: Effective interest rate p.a. Balance in DKK 1000 Fair value in DKK 1000 Value Expire 2021 2020 2021 2020 2021 2020 DKK 2025 7.50% 7.5% 7,671 8,000 7,671 8,000 7,671 8,000 7,671 8,000 The calculated fair value is based on estimates (Level 2 in fair value hierarchy). Note 19 – Project Holdings Amounts in DKK 1000s 2021 2020 Project holdings at 1 January 0 1,628 Additions and improvements 0 0 Sales of project holdings, valued at cost price 0 0 Transferred to / from investment properties 0 -1,628 0 0 Project holdings at 31 December 0 0 Carrying forward of project holdings recognized at net realizable value 0 0 52 Note 20 – Receivables Amounts in DKK 1000s 2021 2020 Receivable Rental Income 4,318 3,056 Deposited funds in banks 15,589 10,119 Other Receivables 4,066 4,027 Receivables at 31 December 23,973 17,202 Write-downs on receivable rental income have been made after an individual assessment and have developed as follows: Bad debt provision as of 1st of January 1,862 1,939 Net additional provisions 922 740 Recognized losses (Write off) 4 -817 2,787 1,862 In the above tenant rental income, receivables have been recognized which were overdue as at 31 December but have not been written down, with the following amounts: Up to 30 days 117 60 Between 30 and 90 days 1,647 978 Over 90 days 5,224 492 6,988 1,530 Trade receivables are predominantly non-interest bearing. Apart from rental income receivable, Park Street has no receivables that are overdue at the balance sheet date or which have been assessed as impaired. Funds deposited in banks relate to receivables selling price from properties sold, funds deposited as collateral for mortgage loans and deposits as security for the initiated maintenance work on properties. Note 21 – Cash and cash equivalents Amounts in DKK 1000s 2021 2020 Petty cash 64 3 Deposits in banks for free disposal 167,756 23,148 167,820 23,151 Note 22 – Share capital Amounts in DKK 1000s 2021 2020 Share capital as on 1st of January 67,513 67,513 Share capital increase 0 0 Share capital at 31 December 67,513 67,513 The share capital consists of 67,513,372 shares of DKK 1 (31 December 2020: 67,513,372 shares of DKK 1). No shares have special rights. The shares are fully paid. Park Street Asset Management Ltd. and Park Street NordAc Sarl own 100% of the nominal class B share capital and 55.89% of the nominal class A share capital and a total of 92.14% (and a corresponding percentage of the votes) of the total nominal share capital of the Company. 53 Note 23 – Treasury shares Number of shares Nominal value (Amount in DKK 1000) Share of share capital 2021 2020 2021 2020 2021 2020 1 January 1,037,804 119,491 1,037 119 0.2% 0.2% Additions during the year 0 918,313 0 918 1.3% 1.3% 31 December 1,037,804 1,037,804 1,037 1,037 1.5% 1.5% In the period from 19 October 2020 to 31 December 2020, Park Street bought 918,313 shares for a total amount of DKK 10.0 million. All own shares are owned by Park Street A/S. As indicated on the company announcement published on 25 February 2022, Park Street A/S had initiated a share buyback program for up to DKK 250m of Class A and Class B shares, to be executed during the period from 25th February 2022 to 30th June 2022. The buyback program was launched in accordance with the authorization granted to the board of directors as stated on the point 3.7 of the Articles of Associated and ap- proved by the shareholders at the Annual General Meeting on 22nd April 2021. The board of directors is authorized in the period until 21st April 2026 to allow the Company to acquire Class A and Class B treasury shares corresponding to a total of 35% of the Company’s Class A and 35% of Class B share capital. Note 24 – Deferred Taxes Amounts in DKK 1000s 2021 2020 Deferred tax liabilities at 1st of January 191,733 152,430 Recognized in other comprehensive income -111 1,549 Correction from previous years 0 -51 Recognized in the income statement 40,465 37,805 Deferred tax liabilities at 31 December 232,087 191,733 Deferred tax is recognized in the balance sheet as follows: Deferred tax (active) 0 0 Deferred tax (liability) -232,087 -191,733 -232,087 -191,733 Deferred tax at 31 December -232,087 -191,733 Deferred tax recognized in the balance The calculation of deferred taxes included DKK 36.4 million relating to tax losses carried forward from Group companies. Based on budget ac- counting and tax profits in the period 2021-2024 and deferred tax liabilities, it is estimated that all tax losses (tax base) will be realized, which is included in the calculation of deferred tax DKK 232.1 million (taxable value) per 31 December 2021. Deferred tax assets (value calculated at a tax rate of 22%) recognized in the balance sheet relate to profit and losses from the subsidiaries Pulse Taastrup P/S, Pulse Glostrup P/S, Pulse N P/S, Pulse O P/S, Ballerup Hotel P/S, Svanevej P/S, Toldbuen P/S, PS Holdco I P/S, Phoam Studio ApS, PSN ApS, Pulse Living ApS, Albuen ApS, PS I ApS, and Park Street UK. 54 Amounts in DKK 1000s Balance 1/1 Recognized in the income statement Recognized in another comprehensive income Balance 31/12 2021 Software 807 -397 0 410 Investment and residential properties 228,140 38,058 -111 266,087 Fixtures and fittings -523 110 0 -413 Receivables -409 -203 0 -612 Provisions -88 88 0 0 Credit institutions 204 -983 0 -779 Tax losses carryforward -36,398 3,792 0 -32,606 191,733 40,465 -111 232,087 2020 Software 0 807 0 807 Investment and residential properties 199,231 27,360 1,549 228,140 Fixtures and fittings -1,552 1,029 0 -523 Receivables 0 -409 0 -409 Provisions -88 0 0 -88 Credit institutions 256 -52 0 204 Tax losses carryforward -45,417 9,019 0 -36,398 152,430 37,754 1,549 191,733 Note 25 – Borrowings Amounts in DKK 1000s 2021 2020 Borrowings, nominal 1,515,581 1,412,811 Market value adjustments -6,110 -7,787 1,509,471 1,405,024 The liabilities are thus included in the balance sheet: Borrowings, long-term 1,488,364 1,354,054 Borrowings, short-term 21,107 50,970 1,509,471 1,405,024 The Group's loans and credits are distributed as per 31 December as follows: Liabilities recognized at fair value Currency Rate type Expiry date 2021 2020 Convertible bonds DKK Interest-free 11-15 years 11,335 11,335 11,335 11,335 Market value adjustments -6,110 -7,787 Carrying amount 5,226 3,548 55 Liabilities recognized at amortized cost Currency Rate type Expiry date 2021 2020 Banks Debt DKK Fixed 0-1 years 0 0 Banks Debt DKK Fixed 2-5 years 503,615 255,260 Mortgage Debt DKK Variable 2-5 Years 43,402 0 Mortgage Debt DKK Variable 6-10 years 35,987 143,986 Mortgage Debt DKK Variable 11-15 years 593,362 97,372 Mortgage Debt DKK Variable 16-20 years 342,380 904,858 Carrying amount 1,518,747 1,401,476 The nominal amounts stated in the tables represent the amount that Park Street will repay under the loan agreements by the end of these agree- ments. Fixed interest loans stated in the tables indicate that a fixed rate applies until the loans' maturity date or until a new negotiation is made with the individual bank. Variable interest rates expressed in the tables indicate that the loans have interest rates that are regularly adjusted over the term of the loans due to fluctuations in market interest rates. The evolution of the long and short term liabilities with credit institutions is specified follows: Amounts in DKK 1000s 2021 2020 Non-current financial liabilities 1,354,054 1,478,691 Current financial liabilities 50,970 154,673 Liabilities associated with assets held for sale 0 0 Financial liabilities with credit institutions at 1 January 1,405,024 1,633,364 Repayment of liabilities to credit institutions -398,859 -150,831 Proceeds from assumption of liabilities to credit institutions 503,306 0 Mortgage and bank debt converted into equity 0 0 Cancellation of debt from disposal of assets 0 0 Repayment of debt from disposal of assets 0 -77,510 Accrued financial expenses 0 0 Financial liabilities with credit institutions at 31 December 1,509,471 1,405,024 Non-current financial liabilities 1,488,364 1,354,054 Current financial liabilities 21,107 50,970 Total financial liabilities with credit institutions at 31 December 1,509,471 1,405,024 Determining the fair value of debt to credit institutions Information on Group’s financial loan agreements, mortgage debt and convertible bonds is disclosed in note 25. Information on estimates and judgments related to the determination of fair value of financial liabilities is disclosed in note 1. As stated in these notes mortgage and bank debt have been recognized at amortised cost in 2021 and 2020. Zero-coupon bonds (former Convertible bonds) As a result of a prior bank agreement, Park Street issued in 2010 convertible bonds for a number of credit institutions for a total nominal DKK 69.0 million. The bonds are non-callable by credit institutions until 31 December 2029 and non-amortized. Conversion period for the bonds to shares has expired, and as a result, the bonds in the annual report classified as normal loans from credit institutions and is therefore included under "Credit institutions" in the balance sheet (zero-coupon bonds). The convertible bonds are recorded as subordinated loan capital and are subordinate to all other unsubordinated debt. The movement of the nominal value of these zero-coupon bonds is as follows: Amounts in DKK 1000s 2021 2020 Zero-coupon bonds at 1 January (Nominal value) 11,335 11,335 Bonds converted into class B shares (Nominal value) 0 0 Zero-coupon bonds at 31 December (Nominal Value) 11,335 11,335 56 The fair value estimated by an independent reviewer (Level 3 of the fair value hierarchy) at December 31 2021 corresponds to a rate of 31.30 (31 December 2020 – 31.30). The carrying value of zero-coupon bonds in the statement of financial position is shown in the following table: Amounts in DKK 1000s 2021 2020 Fair value of financial liability at the date of issue 3,548 3,548 Amortization of convertible bonds at 31 December 0 0 Fair Value adjustment recognized in the Profit and Loss 1,678 0 Fair Value adjustment of convertible bonds converted in Equity 0 0 Balance at 31 December 5,226 3,548 As stated in note 25 Group's non-convertible bonds are recognized as liabilities towards credit institution and are recognized as at fair value based on data that is non-observable in the market. Note 26 – Provisions Amounts in DKK 1000s 2021 2020 Provisions at 1 January 400 400 Used in the year 0 0 Reversed during the year 0 0 Accrued in the year 0 0 Provisions 31 December 400 400 Provisions relate to an obligation with the purchaser of a property concerning environmental clean-up on a land. Note 27 – Contingent assets and liabilities Pledges and guarantees The nominal pledge for the bank debt and mortgage debt given by credit institutions per December 31, 2021 amounts a total of DKK 1,728 million (31 December 2020: DKK 2,002 million), the nominal value of the loans amounts a total of DKK 1,519 million (December 31, 2020: DKK 1,405 million) in the group's investment properties and domiciles with a book value totalling DKK 2,809 million (31 December 2020: DKK 2,658 million). The nominal pledge for the bank debt and mortgage debt given by credit institutions per December 31, 2021 amounts a total of DKK 7.7 million (31 December 2020: DKK 8.0 million), in the group's deposited mortgage deeds with a book value totalling DKK 7.7 million (31 December 2020: DKK 8.0 million). Litigations and disputes No additional significant litigations and disputes are acknowledged by the Group at December 31, 2021 other than the ones indicated in Note 27. Conditional debt relief and contingencies In connection with the sale of a property in 2014, Park Street has been subject to a surcharge for the property if the purchaser on the site before 1 January 2024 obtains more building rights than assumed at the conclusion of the transaction. The additional price amounts to DKK 2,000 for each building rights. Additional building plans will require a change of the local plan for the area in which the property in question is located. Park Street 57 is not aware of any plans to change the local plan in question, for this reason Park Street does not consider the potential additional price as a contingent asset. Contingent assets As part of the sales agreement of the property sold in 2018, Park Street and the buyer have agreed that Park Street is entitled to obtain an addi- tional supplement of DKK 1 million if the buyer completer a development project of more than 5,000 square meters within 5 years from the date of acquisition; the Company has decided not to recognize the contingent asset in the balance as at December 31, 2021. Lease commitments There are operating leases for cars rental and printers. Amounts in DKK 1000s 2021 2020 Within 1 year from the balance sheet date 1 2 Between 1 and 5 years from the balance sheet date 5 3 After 5 years from the balance sheet date 0 0 Operating lease obligations at 31 December 6 5 Minimum lease payments recognized in the profit and loss account for the year 130 242 Note 28 – Financial risks and use of derivative instruments Amounts in DKK 1000s 2021 2020 Mortgages and debentures 7,671 8,000 Financial assets measured at fair value through profit or loss 7,671 8,000 Receivables 23,973 17,202 Cash and equivalents 167,820 23,151 Financial assets measured at amortized cost 191,793 40,353 Credit institutions -5,226 3,548 Financial liabilities measured at fair value through profit or loss -5,226 3,548 Credit institutions 1,509,471 1,401,476 Deposits 38,530 32,501 Accounts payable 7,718 3,988 Other Debts 14,238 12,926 Financial liabilities measured at amortized cost 1,569,957 1,450,892 Risk management policy The financial management of the Group is geared towards stabilization and optimization of the Group's operations, while at minimizing the Group's financial risk exposure. It is part of the Group's policy not to conduct speculative transactions by active use of financial instruments. The group is due to its activities exposed to various financial risks, including liquidity risk, market risks (primarily interest rate risk) and credit risk. Liquidity risk Park Street’s liquidity risk consists on not being able to make regular payments and not being able to provide sufficient liquidity to cover the financ- ing costs, capital repayment obligations and capital investments. Lack of liquidity may arise from insufficient cash resources and may be adversely affected by missed payments from Park Street tenants, increased vacancy, repayment of deposits, divestments, unexpected costs and investment needs. Lack of liquidity may also arise from default of loans signed and in connection with refinancing when existing loan agreements expire or are terminated. 58 Cash reserves total at December 31, 2021 DKK 167.8 million (31 December 2020: DKK 23.2 million). Park Street forecasts that current and generated liquidity is sufficient to carry out the group's planned activities throughout 2022. Maturity of financial liabilities is specified as follows: Amounts in DKK 1000s Carry forward balance Contractual cash flows 0 - 1 Years 2 - 3 Years 4 - 5 Years After 5 Years 2021 Non-derivative financial instruments Credit institutions 1,509,471 1,654,089 43,938 89,546 578,304 942,300 Trade payables 7,718 7,718 0 0 0 0 Deposits 38,530 38,530 33,367 3,802 186 1,175 Other debts 14,238 14,238 0 0 0 0 Total 1,569,957 1,714,575 77,305 93,348 578,490 943,475 2020 Non-derivative financial instruments Credit institutions 1,405,024 1,542,908 69,339 326,760 96,539 1,050,270 Trade payables 3,988 3,988 0 0 0 0 Deposits 32,501 32,501 25,108 3,417 3,492 484 Other debts 12,926 12,926 0 0 0 0 Total 1,454,439 1,592,323 94,448 330,177 100,031 1,050,754 Interest rate risk Park Street is as a result of its financing activities in significant extent exposed to interest rate fluctuations. The interest rate risk is therefore an essential element in the overall assessment of the Group's financial situation. The interest rate risk as of December 31, 2021 primarily relate to the following: Fluctuations in market interest rates on mortgages with variable rates (Cibor6, F2, F3, F5). Renegotiation of the margin rate applied on the mortgage loans. Renegotiation of fixed interest rate of bank debt associated with the extension of loans / terms. Fixed rate includes loans, which applies a fixed rate until the loans' maturity date, to other agreed point in time or until a renegotiation is made with the individual bank. Park Street’s major interest rate risk is the risk that the financial creditors on short notice increase terms of interest and margin rates. In this situation, the level of interest and contribution rates depend on negotiations with the financial institutions. The Group's loan portfolio is continu- ously monitored with a view to optimizing the group's exposure to interest rate risks. Park Street at December 31, 2021 does not have financial instruments for interest rate hedging, and the group has limited opportunities to influence the interest rate risk in the current financial situation. Group's nominal financial debt is specified as follows, based on the type of interest rate that is linked to individual loans: Type of loan Nominal (DKK million) Weighted interest rate (per annum) At December 31, 2021: Mortgage debt Cibor6 139 2.06% Mortgage debt F2 46 2.48% Mortgage debt F3 324 0.59% Mortgage debt F5 505 1.06% Bank debt etc. Fixed 504 0.84% Others Interest-free 0 0.00% 1,519 1.53% 59 At December 31, 2020: Mortgage debt Cibor6 208 1.77% Mortgage debt F2 49 2.64% Mortgage debt F3 383 0.86% Mortgage debt F5 506 1.27% Bank debt etc. Fixed 255 2.54% Others Interest-free 4 0.00% 1,405 1.51% () Weighted interest rate (pa) includes contributions to mortgage and expresses the average weighted interest rates in effect at the turn of the year and in the subsequent period until the next repricing date. The calculated weighted interest rate for all Group loans is at 31 December 2021 1.53% per annum, and is based on the latest confirmed interest rates. The corresponding calculated weighted rate at 31 December, 2020 was 1.51% per annum. This did not have a significant impact on the P&L for 2021. Breakdown by maturity until the next date of interest rate adjustment distributes the Group's loans as follows (as of Dec. 31): Amounts in DKK 1000s 2021 2020 Within six months 123 208 Between 6 and 12 months 121 0 Between 1 and 2 years 254 299 Between 2 and 5 years 1,006 894 After 5 years 5 4 1,509 1,405 The interest rate adjustment date for fixed-rate and interest-free loans is included in the above table at the time of the renegotiation of the maturity and / or terms of the loans or where existing confirmations on a given interest rate expire for a period. Interest rate risk from Park Street’s view can be presented in the following two divisions: Variable market interest rates: Risks associated with fluctuations in market interest rates, i.e. on loans where interest rate adjustment takes place at defined times based on market fluctuations. This applies to mortgage loans with variable interest rates. Interest, etc. on all loans: Risks associated with fluctuations in interest rates on all loans. In addition to the above fluctuations in market rates, this includes the renegotiation of contribution rates at mortgage banks and renegotiation of loan terms with bank creditors. The hypothetical effect on the results and equity after tax as a result of 1 percentage point increase in interest rates (ex. Fair value adjustments) is illustrated in the following table: Amounts in DKK 1000s 2021 2020 Variable Interest rate loans: Effect on income statement -10.2 -14.1 Effect on equity -10.2 -14.1 Regarding loans from credit institutions that have ongoing interest rate adjustments resulting from changes in market interest rates, the table above illustrates that the hypothetical effect on net income and equity as a result of one percentage point increase in interest rates amounts to DKK -10.2 million per annum (2020: DKK -14.1 million). The approach used to determine the effect has been carried out by increasing the base rate by 100 basis points of all the loans with floating rate exposure. This analysis includes F2, F3, F5 loans as well. The effect on the income statement has been calculated for a 12 month period. 60 Currency risk The group exposure is very limited to changes in currency rates. Credit risk The Group's credit risk is primarily related to: Lease receivables Receivables from the sale of properties Receivables form mortgages The maximum credit risk for financial assets is reflected in the accounting values of the balance sheet, and taking into account securities re- ceived. Risks concerning to rental receivables are limited to Park Street’s options to deduct payments from deposits and termination of the covered leases. Credit risk on receivables arising from the sale of properties is limited, as the transactions are always subject to payment of purchase price and deposit of the purchase price. With mortgage deeds, the Group has a usual debtor risk, which is reduced by mortgages on properties. In order to minimize the risk of loss of receivable rent, the tenants' ability to pay prior to entering into leases is assessed to the extent that it is relevant. In addition, there is usually a requirement for a cash deposit, a guarantee and / or prepaid rent. However, if a tenant is unable to pay, it may result in loss as well as reduced income due to rental allowance upon relocation, lower future rental income and any additional costs incurred in connection with refurbishment etc. Credit risk on receivables at December 31, 2021 is further described in note 20. Group’s Cash and cash equivalents consists primarily of deposits in reputable banks. The group believes that there is no significant credit risk associated with the cash. Deposits in banks are labelled at variable interest rate. Financial liabilities with credit institutions and fair value Group’s mortgage debt and bank debt is classified as amortized cost. Fair value of loans measured at amortised cost amount to DKK 1,405 thou- sand. Fair value has been determined as the present value of the contractual cash flows discounted at a rate reflecting the current borrowing rate. Due to the fact that the terms of all loans were renegotiated in 2017, fair value of all floating rate loans is considered to be equal to their carrying amount. Based on a recent transaction, the fair value measurement is considered a level 2 measurement. The fair value of zero-coupon debt is established based on the fair value estimated by an independent reviewer (estimated rate of 31.30 at Decem- ber 31, 2020). The Group's financial assets and liabilities measured at fair value are classified on the following 3 levels in the fair value hierarchy: Level 1: Based on listed prices (non-adjusted) on active markets for identical assets or liabilities. Level 2: Based on inputs other than listed prices that are observable for the asset or liability, either direct (as prices) or indirect (derived from prices). Level 3: Based on data that is not observable in the market. Amounts in DKK 1000s Carry forward balance Level 1 Level 2 Level 3 2021 Mortgages and debentures 7,671 0 7,671 0 Total financial assets 7,671 0 7,671 0 Credit institutions 5,226 0 0 5,226 Total financial liabilities 5,226 0 0 5,226 61 2020 Mortgages and debentures 8,000 0 8,000 0 Total financial assets 8,000 0 8,000 0 Credit institutions 3,548 0 0 3,548 Total financial liabilities 3,548 0 0 3,548 It is the Group's policy to recognise transfers between the different levels from the time at which an event or change in circumstances entails a change in the classifications. No transfers were made between levels 1 and 2 in the accounting period. When calculating the fair value of the Group's liabilities in accordance with level 3 of the fair value hierarchy, a correction is made for the Group's own credit rating, taking into account the legal status of the liabilities, and the security in the assets measured at fair value. Consequently, no direct assumptions of discount factors, etc. are included when measuring liabilities to credit institutions in accordance with level 3 of the fair value hierar- chy. The table below shows the change in liabilities to credit institutions measured at fair value in the balance sheet based on valuation methods in which significant inputs are not based on observable market data (level 3): Amounts in DKK million 2021 2020 Carrying amount at 1st of January 3,548 3,548 Gains / losses in the income statement 1,678 0 Redemptions 0 0 Transfer to Level 3 0 0 Transfer from Level 3 0 0 Balance at 31st of December 5,226 3,548 Gain / loss in the income statement for liabilities held at 31st of December 1,678 0 Gains/losses concerning credit institutions measured at fair value are included in the item 'Adjustment to fair value, net' in the income statement. Liabilities to credit institutions measured at fair value are transferred to/from level 3 in the fair value hierarchy depending on whether the fair value of the loans contains a correction for the Group's own credit rating. For financial instruments that are not measured at fair value, the book value is assessed as being a reasonable approximation of fair value. This is based on the trade price of the underlying bonds (Level 2). Note 29 – Non-current operating items, etc. Amounts in DKK 1000s 2021 2020 Depreciation and amortization -4,330 -2,891 Profit/loss on sale of operating assets 1,472 38,483 Total regulation -2,858 35,592 Note 30 – Change in operating capital Amounts in DKK 1000s 2021 2020 Change in receivables -6,771 311 Change in provisions 0 0 Change in deposit 6,029 -8,865 Change in trade payables 3,730 2,676 Change in total working capital 2,988 -5,878 62 Note 31 – Related parties Park Street Asset Management Ltd. (London, England) has controlling influence in Park Street A/S by virtue of its shareholding of 92.14% of shares and votes in Park Street A/S. See note 5, where the remuneration of Directors and Board of Park Street A/S appears. The Company additionally had the following transactions between Park Street and related parties that consisted of intangible assets. Amounts in DKK 1000s 2021 2020 Other related parties Intangible assets 0 3,249 Software expenses 2,234 0 There have been no other transactions, etc. with related parties during the period. Note 32 – Subsequent Events An investment property in Loftborvej has been sold for DKK 117.6 million in January 2022. Significant leases for over 3,800 square meters have been signed since January 2022. As indicated on the company announcement published on 25 February 2022, Park Street A/S had initiated a share buyback program for up to DKK 250m of Class A and Class B shares, to be executed during the period from 25th February 2022 to 30th June 2022. . The buyback program was launched in accordance with the authorization granted to the board of directors as stated on the point 3.7 of the Articles of Associated and ap- proved by the shareholders at the Annual General Meeting on 22nd April 2021. The board of directors is authorized in the period until 21st April 2026 to allow the Company to acquire Class A and Class B treasury shares corresponding to a total of 35% of the Company’s Class A and 35% of Class B share capital. From the balance sheet date until the date of presentation of this Annual Report no additional events have occurred other than the abovementioned which significantly affects the assessment of the annual report. Note 33 – Accounting policies The annual report for the period January 1 to December 31, 2021 for Park Street A / S comprises the consolidated financial statements of Park Street A / S and its subsidiary companies and separate financial statements of the parent company. The annual report of Park Street A / S for the year 2021 is prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and requirements according to the Danish Financial Statements Act. The annual report has been approved by the Board of Directors on March 30, 2022. The annual report shall be submitted to Park Street A / S shareholders for approval at the Annual General Meeting that will take place on April 21, 2022. BASIS OF PREPARATION The annual report is presented in Danish crown (DKK) rounded to the nearest DKK 1,000, which is considered to be the primary currency of the Group's activities and the functional currency of the parent company. The annual report is prepared on a historical cost basis, except for investment properties and certain financial obligations that are measured at fair value. Further, investment properties and domicile are measured at reas- sessed value. The accounting policies are otherwise as described below. CHANGES IN ACCOUNTING POLICIES Accounting policies are unchanged from the previous year. DESCRIPTION OF CONSOLIDATED ACCOUNTING POLICIES 63 Consolidated Financial Statements The consolidated financial statements include Park Street A / S (parent company) and companies (subsidiaries) controlled by the parent. The parent company is deemed to have control if it (i) has control of the relevant activities in the entity, (ii) is exposed to or are entitled to a variable returns from the investment and (iii) may use its controlling interest to affect the variables of their return. The consolidated financial statements are prepared as a consolidation of the parent financial statements and accounts of the individual subsidiar- ies, which have been prepared in accordance with the Group's accounting policies, the elimination of intercompany income and expenses, share- holdings, balances, dividends and gains and losses on transactions, taken between the consolidated companies. Sale of subsidiaries and activities When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive in- come in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Foreign currency Transactions in currencies other than the individual companies’ functional currencies are translated initially at the transaction date. Receivables and payables and other monetary items in foreign currencies that have not been settled at the balance sheet date are translated at the closing rate. Exchange differences arising between the date of transaction and payment date or the balance sheet date are recognized in the income statement under financial income or expenses. Exchange differences arising from the translation of foreign companies' balance sheet items at the beginning of the exchange rates and the translation of income statements from average rates to closing rates are recognized in other comprehensive income. Exchange rate on full or partial disposal of foreign entities, where control is transferred, the foreign currency translation adjustments are recognized in other comprehensive income, which is attributable to the unit from other comprehensive income to net income along with the gain or loss on the disposal. PROFIT AND LOSS STATEMENT Revenue Revenue includes rental income, interest on mortgage and debt instruments measured at fair value, sale amount from sold project holding, sales of goods and sales of other services. Rental Revenue is measured at the fair value of the consideration received or receivable and is calculated exclusive of VAT collected on behalf of third parties and discounts. Revenue from the sale of project portfolios is recognized when delivery takes place and transfer of risk to the buyer (sales method), ie when any construction is completed and finally transferred to the buyer, and all essential elements of the sales agreement are met. Sales of goods factored when delivery and risk transition have taken place. Rental income, interest on mortgage and debt instruments measured at fair value, and sales of other services is recognized in the periods to which they relate. Operating costs Operating costs include costs directly related to turnover, including ongoing operating expenses of the Group investment properties, costs associ- ated with the acquisition and construction of submitted project inventories and other operating costs. Adjustments to fair value, net Adjustment to fair value, net includes continuous adjustments of investment properties and related debt as well as debt instruments measured at fair value through profit or loss. Realized gains on sale of investment properties Realized gains on sale of investment properties is recognized when the risks and rewards are transferred to the buyer, and the control of the prop- erty has been transferred. Financial income and expenses 64 Financial items include interest income and interest expenses, foreign exchange rate adjustments, amortization premiums / discounts, realized and unrealized gains and losses on securities as well as surcharges and refunds under the tax. Borrowing costs directly attributable to the development projects of investment or project portfolios, added to the cost of the assets until the time when the project is completed and the property can be used for the intended purpose. If there is a loan directly to finance the development pro- ject, calculated borrowing costs on the basis of an average interest rate of the group's loans except for loans recorded at the acquisition of specif- ic assets. Other borrowing costs are recognized in the income statement in the periods to which they relate. Income tax expense Tax for the year comprises current tax and changes in deferred tax, is recognized in the income statement with the portion attributable to the profit and directly in equity or in other comprehensive income with the portion attributable to amounts recognized directly in equity and in other comprehensive income. BALANCE STATEMENT Intangible assets Intangible assets (software) is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of those parts that are replaced is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation, based on a component approach, is calculated using the straight line method to allocate the cost over the asset’s estimated useful lives. Intangible assets (software) have been depreciated under the assumption of 3 years of useful live. Depreciation is based on revalued amount less estimated residual value after useful life (residual value). Domicile Domicile properties are initially measured at cost. The cost comprises the cost and expenses directly associated with the acquisition. Fair value at the time of a previous investment property is transferred to owner-occupied properties, is considered the property new cost. Domicile properties are then measured at a readjusted value, corresponding to the fair value at the time of re-evaluation less accumulated depreciation. Principles and Estimates Management's estimate of the properties' fair value are shown in note 1. Revaluations recognized in other comprehensive income and attributed to the separate reserve for revaluation of equity. Owner-occupied properties are depreciated over the assets / components' estimated useful lives, as follows: Buildings 50 years Other components 15-30 years Depreciation is based on revalued amount less estimated residual value after useful life (residual value). Land is not depreciated. Investment properties Investment property includes land and buildings held by Park Street to earn rental income and / or capital gains. Investment properties are meas- ured initially at cost, which comprises the properties and cost, directly related costs. Investment properties are then measured at fair value and all value adjustments are recognized in the income statement under "Adjustment to fair value, net". Principles and methods for management's estimate of the properties' fair values is disclosed in note 1. Land plots, where here is no final decision on the purpose of usage have been included in the Group’s portfolio as investment properties. Machinery and equipment All machinery and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of 65 those parts that are replaced is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation, based on a component approach, is calculated using the straight line method to allocate the cost over the asset’s estimated useful lives as stated above on Domicile. Depreciation is based on revalued amount less estimated residual value after useful life (residual value). Investment in associates Investments in associates are recognised at cost price following the cost method principle. The investment is recorded at its historical cost (pur- chase price). Once the initial transaction is recorded there is no need to adjust it, unless there is evidence that the fair market value of the invest- ment has declined below the recorded historical cost. If so, the investment is written down to adjust to its new fair value. Impairment of non-current assets The carrying value of tangible assets that are not measured at fair value are assessed regularly and at least annually to determine whether there is any indication of impairment. When such an indication is present, the asset is valued at recovery value. The recoverable amount is the higher of an asset's fair value less costs to sell or value in use. Value in use is the present value of expected future cash flows from the asset or cash-generating unit to which the asset belongs. If the asset does not generate cash independently of other assets, the recoverable amount of the smallest cash- generating unit that includes the asset. Impairment is recognized if the carrying amount of an asset or cash-generating unit exceeds the assets' useful or cash-generating unit's recovera- ble amount does not exceed the carrying amount that the asset would have had after depreciation if the asset had not been impaired. Current financial assets at amortised cost Mortgages classified as financial instruments categorized as "financial assets measured at fair value through profit or loss" are recognized at fair value on initial recognition and subsequently measured at fair value, continuously carried out a revaluation of this statement. Fair value is determined based on observable market data (interest rates), the debtor's creditworthiness and on assessments of the loan term to maturity and ranking in the position. Project Holdings Project Holdings include properties held for the purpose of sale, including ongoing or completed construction projects for own account and former investment properties under development for sale. Project inventories are measured at cost or net realizable value, if this is lower. Fair value at the time when a previous investment property is transferred to project inventory is considered the property's new cost. The cost includes the purchase price of the properties plus project and construction costs incurred, as well as borrowing costs attributable to the project / conversion period and indirect project costs. When it is estimated that the total cost of construction projects, including replacement / expansion projects, will exceed the total sales income, the expected loss is recognized in the profit and loss. Receivables Receivables are measured at amortized cost. Impairment losses are made for losses which are deemed to have resulted in an objective indication that an individual receivable is impaired. Prepayments Prepayments recognized under assets comprise incurred costs related to coming financial years. Prepayments are measured at cost. Dividends Dividends are recognized as a liability at the time of adoption at the general meeting. Dividends proposed for distribution is shown as a separate component of equity until the Annual General Meeting. 66 Own shares Acquisition and selling prices of company shares and dividends are recognized directly in equity under retained earnings. Foreign currency reserve Currency translation reserve includes the parent company shareholders' share of exchange rate differences arising from the translation of accounts for companies with a different functional currency than Danish crown. The reserve is dissolved by the disposal of foreign entities. Revaluation reserve Reserve for revaluation includes the accumulated revaluation of domicile. The reserve is reduced by transfer to the profit for the year, as deprecia- tion and write-downs are made on the properties written up or for sale. Corporate tax and deferred tax Current tax liabilities and current tax receivables are recognized in the balance sheet as calculated tax on the taxable income, but adjusted for tax on prior years' taxable income and taxes paid on account. Deferred tax is measured using the balance sheet liability method on temporary differences between accounting and tax values of assets and liabilities, excluding deferred taxes on temporary differences arising on initial recognition of goodwill or the initial recognition of a transaction that is not a business combinations, and where the temporary difference found at the time of initial recognition affects neither the accounting profit nor taxable income. Deferred tax assets including the tax value of tax loss carryforwards, are recognized under non-current assets at the value at which they are expected to be used either by elimination in tax on future earnings or against deferred tax liabilities. Deferred tax assets are reviewed annually and recognized only to the extent that it is probable that they will be utilized. Deferred tax is measured based on the tax rates and at the balance sheet date will be applicable in the respective countries when the deferred tax is expected to crystallize as current tax. Change in deferred tax due to changes in tax rates is recognized in the income statement. Provisions Provisions are recognized when, as a result of an event occurring before or at the balance sheet date has a legal or actual obligation and it is probable that a payment will be needed to settle the obligation. The item includes provision for dealing with specific uncertainties on completed projects. Provisions are measured on a best estimate of the amount required to settle the obligation. Provisions with an expected maturity of one year and above are classified as non-current liabilities. Liabilities Financial liabilities are initially measured at fair value and subsequently measured as described below. Financial liablities are derecognised when they expiry, are cancelled or are converted into equity. A substantial modification of the terms of a financial liability is treated as a settlement of the original liability and recognition of a new liability. A change in the present value of the contractual cash flows with at least 10%, measured on the basis of the original effective interest rate, is treated as a substantial modification. Financial liabilities attributable to investment properties are measured at amortised cost. Prior to the signficiant modification of the liabilities attribut- able to investment property, they were measured at fair value through profit or loss. Adjustments to financial liabilities attributable to investment properties were recognized in the income statement under "Adjustment at fair value, net". Other liabilities, including non-current liabilities, debt to suppliers and other debt, are measured at amortized cost. When a financial liability without equity conversion features is converted into equity, the liability is considered settled at the fair value of the shares issued. A gain or loss is reocgnised in financial items. Assets held for sale Assets held for sale include non-current assets that are for sale. Liabilities relating to assets held for sale are liabilities directly related to those assets that will be transferred during the transaction. Assets are classified as "held for sale" when their carrying amount will primarily be recouped through a sale within 12 months according to a formal plan rather than through continued use and provided that the sale at the balance sheet date 67 is considered to be highly probable. When the properties are expected to be recovered from the sale of subsidiaries that own the properties, all the subsidiaries' assets and liabilities are reclassified. Assets are not depreciated from the time they are classified as "held for sale". Assets held for sale are measured at the lower of the carrying amount at the time of the "sale-for-sale" or fair value less cost of sale. However, investment properties held for sale are measured according to the Group's usual accounting policies for investment properties, ie. at fair value without deduction of selling costs. CASH FLOW STATEMENT The cash flow statement is presented according to the indirect method and shows cash flows divided by operating, investing and financing activities for the year, the year's shift in cash and cash equivalents at the beginning and end of the year. The liquidity effect on the sale of companies is shown separately under cash flow from investing activities. The cash flow statement recognizes the cash flows of sold companies until the date of sale. Cash flows from operating activities are calculated as operating profit adjusted for non-cash operating items, changes in working capital, received and paid financial income and expenses and paid corporation tax. Cash flows from investing activities include payments in connection with sales of companies and activities, purchase and sale of financial assets as well as purchase, development, improvement and sales, etc. of intangible and tangible assets, including investment properties. Cash flows from financing activities include changes in the parent company's share capital and associated costs as well as admission and repay- ment of loans, repayment of interest-bearing debt, purchase and sale of own shares and payment of dividends. Cash and cash equivalents comprise cash with insignificant price risk. 68 Park Street | Park Street A/S Financial Statements 69 2021 PARK STREET A/S FINANCIAL STATEMENTS Park Street | Park Street A/S Financial Statements 70 Income statement Note Amounts in DKK 1000s 2021 2020 2 Net sales 140,258 162,729 3 Operating expenses -35,581 -43,828 Gross profit 104,678 118,901 4 Employee benefit expenses -16,396 -16,032 5 Other external expenses -11,264 -6,371 6 Depreciation, amortisation and impairment -3,938 -3,442 Operating profit (EBIT) 73,079 93,056 8 Financial income subsidiaries 11,777 7,227 7 Financial expenses -20,931 -22,405 Earnings before value adjustments (EBVAT) 63,926 77,878 8 Income / Loss from subsidiaries 54,289 -26,237 9 Adjustment to fair value, net 67,539 97,857 Gains realised on the sale of investment properties 1,472 38,483 Profit before tax 187,225 187,981 10 Tax on profit for the period -41,767 -42,660 Profit for the period 145,459 145,321 Distributed as follows Parent's shareholders 145,459 145,321 Profit for the period 145,459 145,321 Park Street | Park Street A/S Financial Statements 71 Statement of comprehensive income Note Amounts in DKK 1000s 2021 2020 Profit for the period 145,459 145,321 Other comprehensive income: Items that cannot be reclassified to the income statement: Fair value adjustment of domicile properties 0 7,041 Tax on fair value adjustment of domicile properties 0 -1,549 Other comprehensive income after tax 0 5,492 Comprehensive income for the period 145,459 150,813 Distributed as follows Parent's shareholders 145,459 150,813 Comprehensive income for the period 145,459 150,813 Park Street | Park Street A/S Financial Statements 72 Statement of financial position Note Amounts in DKK 1000s 2021 2020 ASSETS Non-current assets Intangible assets Software 1,865 3,671 1,865 3,671 Property, plant and equipment Domiciles 0 196,298 12 Investment properties 1,596,596 2,131,476 13 Machinery and equipment 49 744 1,596,645 2,328,517 Financial assets 8 Investment in subsidiaries 452,291 87,668 Investment in associates 2,029 2,029 Deferred tax assets 0 0 Deposits 161 187 454,481 89,885 Total non-current assets 2,052,991 2,422,074 Current assets 14 Current financial assets at amortised cost 165,554 165,883 15 Receivables 36,038 18,710 Income tax receivable 4,986 4,358 Prepaid expenses and accrued income 2,029 1,058 Cash and cash equivalents 152,652 13,321 Total current assets 361,259 203,330 Total assets 2,414,250 2,625,404 Park Street | Park Street A/S Financial Statements 73 Statement of financial position Note Amounts in DKK 1000s 2021 2020 LIABILITIES Equity Share capital 67,513 67,513 Revaluation reserve 0 55,106 Share Premium 289,260 289,260 Accumulated profit 860,265 660,067 Total equity 1,217,038 1,071,946 Liabilities Non-current liabilities 16 Deferred tax 232,087 191,733 17 Borrowings 894,301 1,259,880 Deposits 4,413 6,936 1,130,801 1,458,548 Current liabilities Provisions for liabilities 400 400 17 Current borrowings 20,347 50,970 Trade and other payables 11,860 5,175 Income tax payable 1,242 4,524 Deposits 25,108 24,166 Other liabilities 7,454 9,674 66,411 94,910 Total liabilities 1,197,212 1,553,459 Total equity and liabilities 2,414,250 2,625,404 Park Street | Park Street A/S Financial Statements 74 Statement of equity Amounts in DKK 1000s Share capital Revaluation reserve Accumulated profit Share Premium Equity Total Statement of equity for 2021: Equity as at 1 January 2021 67,513 55,107 660,066 289,260 1,071,946 Comprehensive income for the period Profit for the period 0 0 145,459 0 145,459 Fair value adjustment of domicile 0 0 0 0 0 Tax on other comprehensive income 0 0 0 0 0 Other comprehensive income during the financial year 0 0 0 0 0 Comprehensive income for the period 0 0 145,459 0 145,459 Transactions with owners Repurchase own shares 0 0 25 0 25 Transfer of domicile properties to subsidiaries 0 -55,107 54,715 0 -392 Cash injection by existing shareholders 0 0 0 0 0 Liabilities wih financial institutions converted into Equity 0 0 0 0 0 Total transactions with owners 0 -55,107 54,740 0 -367 Other adjustments Depreciation of revalued value of domiciles 0 0 0 0 0 Total other adjustments 0 0 0 0 0 Equity as at 31 December 2021 67,513 0 860,265 289,260 1,217,038 Statement of equity for 2020: Equity as at 1 January 2020 67,513 51,177 523,183 289,260 931,133 Comprehensive income for the period Profit for the period 0 0 145,321 0 145,321 Fair value adjustment of domicile 0 7,041 0 0 7,041 Tax on other comprehensive income 0 -1,549 0 0 -1,549 Other comprehensive income during the financial year 0 5,492 0 0 5,492 Comprehensive income for the period 0 5,492 145,321 0 150,813 Transactions with owners Repurchase own shares 0 0 -10,000 0 -10,000 Cash injection by existing shareholders 0 0 0 0 0 Liabilities wih financial institutions converted into Equity 0 0 0 0 0 Total transactions with owners 0 0 -10,000 0 -10,000 Other adjustments Depreciation of revalued value of domiciles 0 -1,563 1,563 0 0 Total other adjustments 0 -1,563 1,563 0 0 Equity as at 31 December 2020 67,513 55,106 660,066 289,260 1,071,946 Park Street | Park Street A/S Financial Statements 75 Statement of cash flows Note Amounts in DKK 1000s 2021 2020 Operating profit (EBIT) 73,079 93,056 Adjustment for illiquid operating items, etc. 3,938 3,442 Change in project holdings, net 0 0 Change in operating capital -7,217 -4,670 Cash flows concerning primary operations 69,801 91,828 Financial expenses paid -20,931 -22,405 Paid Corporate Tax -5,275 -4,358 Total cash flow from operating activities 43,594 65,064 Cash flow from investing activities Improvements to investment properties -17,689 -2,239 Sales of investment properties 8,026 192,805 Purchase of intangible assets 0 -3,249 Purchases of other property, plant and equipment 0 -14,645 Share capital increase (cash injection) -25 0 Intercompany Loans 0 -142,257 Total cash flow from investing activities -9,688 30,415 Cash flow from financing activities Repurchase Own Shares 0 -10,000 Proceeds from assumption of liabilities to credit institutions 503,306 0 Repayment of liabilities to credit institutions -397,881 -47,714 Repayment of debt from disposal of assets 0 -77,510 Total cash flow from financing activities 105,425 -135,224 Total cash flow for the period 139,331 -39,745 Liquid assets as at 1 January 13,321 53,066 Liquid assets at the end of the period 152,652 13,321 Liquid assets at the end of the period Cash and short term deposit 152,652 13,321 Liquid assets at the end of the period 152,652 13,321 Park Street | Notes to Park Street A/S Financial Statements 76 Summary Note 1 Accounting policies, accounting estimates and risks, etc. Note 2 Net sales Note 3 Operating expenses Note 4 Employee benefits expenses Note 5 Auditor’s fees Note 6 Depreciation, amortisation and impairment Note 7 Financial Expenses Note 8 Investment in subsidiaries Note 9 Adjustment to fair value, net Note 10 Tax on profit for the year and other comprehensive income Note 11 Domiciles Note 12 Investment properties Note 13 Machinery and equipment Note 14 Current financial assets at amortised cost Note 15 Receivables Note 16 Deferred taxes Note 17 Borrowings Note 18 Contingent assets and liabilities Note 19 Financial risks and the use of derivative financial instruments Note 20 Change in operating capital Note 21 Related parties Note 22 Accounting policies Park Street | Notes to Park Street A/S Financial Statements 77 Notes Note 1 - Accounting policies, accounting estimates and risks, etc. The accounting assumptions, assessments and estimates made in the preparation of the parent company accounts are the same as described in note 1 of the consolidated financial statements, to which reference is made. See note 8 regarding the recognition and measurement of investments, receivables from subsidiaries and provisions relating to subsidiaries in the Parent Company's financial statements. Note 2 - Net sales Amounts in DKK 1000s 2021 2020 Rental income 111,926 119,591 Sales of other services 27,437 42,550 Total sales of services 139,364 162,141 Sales totals, project holdings 0 Interest income, mortgages and instruments of debt 895 587 140,258 162,729 Note 3 - Operating expenses Amounts in DKK 1000s 2021 2020 Operating expenses, investment properties 31,528 -39,400 Operating expenses, other services 4,053 4,428 35,581 43,828 Note 4 – Employee benefits expenses Amounts in DKK 1000s 2021 2020 Salary 15,190 14,875 Contribution-based pensions () 819 835 Other social security costs 58 60 Other staff costs 327 261 16,396 16,032 Average number of employees 18 24 () Park Street A/S has only defined contribution plans. For defined contribution plans, the employer undertakes to pay a defined contribution to a pension fund, but has no risk with regard to future developments in interest rates, inflation, mortality, disability, etc. as regards the amount to be paid to the employee. Remuneration of the CEO and the Board of Directors is described in Note 5 of the consolidated accounts. Park Street | Notes to Park Street A/S Financial Statements 78 Note 5 – Auditor’s fees The auditor appointed in 2021 and 2020 is PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab. Their fees can be specified as follows: Amounts in DKK 1000s 2021 2020 Statutory audit 420 373 Other assurance services 40 0 Tax and VAT advice 192 177 Other services 155 20 807 570 Fees for non-audit services delivered by PricewaterhouseCoopers, Statsautoriseret Revisionspartnerselskab, include general accounting and tax advisory services. Note 6 – Depreciation, amortisation and impairment Amounts in DKK 1000s 2021 2020 Depreciation, software 1,807 1,361 Depreciation, domicile properties 1,497 1,563 Depreciation, inventory and fixed assets 634 518 3,938 3,442 Note 7 – Financial Expenses Amounts in DKK 1000s 2021 2020 Interest expenses, liabilities to credit institutions measured at amortized cost 19,142 21,256 Interest expenses, group companies 0 9 Other interest costs and fees 521 264 Borrowing costs 1,268 875 20,931 22,405 Park Street | Notes to Park Street A/S Financial Statements 79 Note 8 – Investment in subsidiaries See accounting policies on note 33 of the Consolidated Financial Statements. Receivables considered to be part of the overall investment in the subsidiary are written down by any remaining negative equity value. Amounts in DKK 1000s 2021 2020 Cost price at January 1 92,377 92,227 Additions 311,767 150 Cost price at December 31 404,144 92,377 Value adjustments at 1 January -4,590 21,869 Share of profit/loss for the year after tax 54,289 -26,459 Value adjustments at December 31 49,700 -4,590 Carrying amount at January 1 87,668 113,920 Investments with negative equity offset against trade receivables -1,553 -119 Carrying amount at December 31 452,291 87,668 List of subsidiaries: Subsidiaries Registered Address Equity PSN ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse Glostrup P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse Taastrup P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Phoam Studio ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse Living ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Albuen ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% PSI ApS Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% PSI Hold Co P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse N P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Pulse O P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Ballerup Hotel P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Toldbuen P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Svanevej P/S Svanevej 12, 4th Floor, 2400 Copenhagen NV 100% Park Street Nordicom UK Ltd 85, Great Portland Street, London, W1W 7LT, England 100% Note 9 – Adjustments to fair value, net Amounts in DKK 1000s 2021 2020 Fair value adjustment, investment properties 67,539 97,857 67,539 97,857 Park Street | Notes to Park Street A/S Financial Statements 80 Note 10 – Tax on profit for the year and other comprehensive income Amounts in DKK 1000s 2021 2020 Annual tax can be divided as follows: Current tax on profit of the year 1,242 4,524 Current tax, previous years 59 382 Changes in deferred taxes 38,938 37,805 Changes in deferred taxes previous years 1,527 -51 41,766 42,660 Tax on profit for the year can be explained as follows: Estimated tax at a tax rate of 22% 41,190 41,356 Non-deductible costs 44 586 Adjustment of deferred tax assets and liabilities 533 718 41,766 42,660 Effective tax rate 22.31% 22.69% Amounts in DKK 1000s 2021 2020 Tax on other comprehensive income: Tax on fair value adjustment of domicile properties 111 -1,549 111 -1,549 Note 11 – Domiciles Amounts in DKK 1000s 2021 2020 Cost per 1st of January 208,689 201,648 Revaluation of value 0 7,041 Transfer to/from subsidiaries -194,801 0 Cost / Revaluated Value at 31 December 13,888 208,689 Depreciation and amortization per. 1st of January -12,391 -10,828 Depreciation -1,497 -1,563 Depreciation and amortization at 31 December -13,888 -12,391 Balance at 31 December 0 196,298 Domicile properties consist of a hotel in Ballerup and Park Street’s headquarters in Copenhagen. As the property is presented as a domicile, depreciation is required in accordance with IAS 16. Assets are revaluated equal to fair value at the date of revaluation less accumulated depreciation and subsequent impairment losses. There have been revaluations both as of December 31, 2021 and December 31, 2020. Domicile properties are pledged as security for loans, mortgage loans and other credit institutions as stated in Note 29. Information on fair value hierarchy of Domicile is as follows: Park Street | Notes to Park Street A/S Financial Statements 81 Amounts in DKK 1000s Level 1 Level 2 Level 3 Total At 31 December 2021: Domicile property 0 0 0 0 0 0 0 0 At 31 December 2020: Domicile property 0 0 196,298 196,298 0 0 196,298 196,298 Classification of domicile properties in level 3 means that determining the fair value of domicile properties mainly based on data that are not ob- servable in the market. During 2021 and 2020 been no transfers between levels of the fair value hierarchy. The fair value of domicile properties is based on estimates. Refer to note 1 for additional details. No domiciles have been acquired in 2021 and 2020. If Park Street domiciles were measured at the historical cost less accumulated depreciation, the book value would have been the following: Amounts in DKK 1000s 2021 2020 Domicile properties 116,131 117,628 116,131 117,628 Note 12 – Investment properties As of 31 December 2021 there are no ongoing sales processes regarding investment properties. Amounts in DKK 1000s 2021 2020 Balance at 1 of January 2,131,476 2,168,799 Transfer to / from a subsidiary -620,913 0 Transfer to / from project holdings 0 1,628 Costs incurred for improvements 17,689 2,140 Adjustment to fair value, net 76,553 97,857 Acquisition of properties 0 14,645 Depreciation of fixed assets -129 730 Sale of investment properties -8,080 -154,322 Balance at 31 December 1,596,596 2,131,476 Fair value hierarchy for investment: Amounts in DKK 1000s Level 1 Level 2 Level 3 Total At 31 December 2021: Investment properties 0 0 1,596,596 1,596,596 0 0 1,596,596 1,596,596 Park Street | Notes to Park Street A/S Financial Statements 82 At 31 December 2020: Investment properties 0 0 2,131,476 2,131,476 0 0 2,131,476 2,131,476 Classification of investment properties in level 3 means that determining the fair value of investment properties is mainly based on data that is not observable in the market. During 2021 and 2020 there has been no transfers between levels of the fair value hierarchy. The fair value of investment properties is based on estimates. Refer to note 15 in the consolidated financial statements for additional details. The net income of the investment portfolio is as follows: Amounts in DKK 1000s 2021 2020 Rental income from investment properties 119,609 114,531 Operating expenses, investment properties -34,679 -40,564 Net income from investment properties 84,930 73,967 The Group has entered into operating leases (leases) to tenants of its investment properties. The leases duration is up to 15 years. The contract minimum payments under existing leases are distributed as follows: Amounts in DKK 1000s 2021 2020 Remaining termination within 1 year from the balance sheet date 26,972 75,578 Remaining termination between 1 and 5 years from the balance sheet date 70,238 113,391 Remaining termination after 5 years from the balance sheet date 57,607 52,362 154,817 241,331 Note 13 – Machinery and equipment Amounts in DKK 1000s IT Equipment Appliances Total Machinery and Equipment Cost at 1 of January 2021 4,150 8,424 12,574 Additions during the year 0 0 0 Disposals during the year 0 0 0 Cost at 31 December 2021 4,150 8,424 12,574 Amortization at 1 January 2021 -4,115 -7,715 -11,830 Amortization during the year -16 -680 -696 Amortization at 31 December 2021 -4,131 -8,395 -12,526 Balance at 31 December 2021 19 29 48 Cost at 1 of January 2020 4,140 8,335 12,475 Additions during the year 10 89 99 Disposals during the year Cost at 31 December 2020 4,150 8,424 12,574 Park Street | Notes to Park Street A/S Financial Statements 83 Amortization at 1 January 2020 -4,099 -6,799 -10,898 Amortization during the year -16 -916 -932 Amortization at 31 December 2020 -4,115 -7,715 -11,830 Balance at 31 December 2020 35 709 744 Note 14 – Current financial assets at amortised cost Park Street has the following mortgage and debt instruments classified as "Financial assets measured at amortized cost": Amounts in DKK 1000s 2021 2020 Financial assets at amortized cost at 1 January 165,883 23,961 Repayment of the year -329 -335 Additions - Intercompany loans 0 142,257 Financial assets at amortized cost at 31 December 165,554 165,883 Mortgages and debt securities classified as financial instruments in the category "Financial assets recognized at amortized cost" expire in the following periods: Effective interest rate p.a. Balance in DKK 1000 Fair value in DKK 1000 Value Expire 2021 2020 2021 2020 2021 2020 DKK 2025 7.50% 7.50% 7,671 8,000 7,671 8,000 DKK 2022 7.50% 7.50% 1,000 1,000 1,000 1,000 DKK 2022 7.50% 7.50% 1,500 1,500 1,500 1,500 DKK 2022 7.50% 7.50% 2,200 2,200 2,200 2,200 DKK 2022 7.50% 7.50% 13,100 13,100 13,100 13,100 DKK 2022 7.50% 7.50% 140,083 140,083 140,083 140,083 165,883 165,883 165,883 165,883 Park Street A/S has provided a credit line facility to the subsidiary Pulse Taastrup P/S with an aggregate principal amount of nominal DKK 175 million (153.2 million utilized at 31.12.21) with an annual interest rate of 7.5% payable at the maturity date of the loan. Additionally, Park Street A/S has provided a credit line facility to the subsidiary Phoam Studio ApS with an aggregate principal amount of nominal DKK 5 million (4.7 million utilized at 31.12.21) with an annual interest rate of 7.5% payable at the maturity date of the loan. The calculated fair value is based on estimates (Level 3 in fair value hierarchy). Note 15 – Receivables Amounts in DKK 1000s 2021 2020 Receivable Rental Income 3,963 2,894 Receivables from sale of properties 0 0 Deposited funds in banks 12,209 6,739 Other Receivables 409 327 Receivables from related parties 19,456 8,751 Receivables at 31 December 36,038 18,710 Write-downs on receivable rental income have been made after an individual assessment and have developed as follows: Park Street | Notes to Park Street A/S Financial Statements 84 Bad debt provision as of 1st of January 1,712 1,488 Additional provisions 736 555 Recognized losses (Write off) -4 -331 2,443 1,712 In the above tenant rental income, receivables have been recognized which were overdue as at 31 December but have not been written down, with the following amounts: Up to 30 days 0 88 Between 30 and 90 days 0 1,035 Over 90 days 1,300 379 1,300 1,502 Trade receivables are predominantly non-interest bearing. Apart from rental income receivable, Park Street has no receivables that are overdue at the balance sheet date or which have been assessed as impaired. Funds deposited in banks relate to receivables selling price from properties sold, funds deposited as collateral for mortgage loans and deposits as security for the initiated maintenance work on properties. Note 16 – Deferred Taxes Amounts in DKK 1000s 2021 2020 Deferred tax at 1st of January 191,733 152,430 Recognized in other comprehensive income -111 1,549 Correction from previous years 1,654 -51 Recognized in the income statement 38,811 37,805 Deferred tax at 31 December 232,087 191,733 Deferred tax is recognized in the balance sheet as follows: Deferred tax (liability) -232,087 -191,733 -232,087 -191,733 Deferred tax at 31 December -232,087 -191,733 Deferred tax recognized in the balance The calculation of deferred taxes included DKK 148 million relating to tax losses carried forward from Group companies. Based on budget ac- counting and tax profits in the period 2021-2024 and deferred tax liabilities, it is estimated that all tax losses (tax base) will be realized, which is included in the calculation of deferred tax DKK 232.1 million (taxable value) per 31 December 2021. Amounts in DKK 1000s Balance 1/1 Recognized in the income state- ment Recognized in another comprehensive income Balance 31/12 2021 Software 807 -397 0 410 Investment and residential properties 228,140 38,058 -111 266,087 Fixtures and fittings -523 110 0 -413 Project Holdings 0 0 0 0 Receivables -409 -203 0 -612 Provisions -88 88 0 0 Credit institutions 204 -983 0 -779 Tax losses carryforward -36,398 3,792 0 -32,606 Park Street | Notes to Park Street A/S Financial Statements 85 191,733 40,465 -111 232,087 Amounts in DKK 1000s Balance 1/1 Recognized in the income state- ment Recognized in another comprehensive income Balance 31/12 2020 Software 0 807 0 807 Investment and residential properties 199,231 27,360 1,549 228,140 Fixtures and fittings -1,552 1,029 0 -523 Project Holdings 0 0 0 0 Receivables 0 -409 0 -409 Provisions -88 0 0 -88 Credit institutions 256 -52 0 204 Tax losses carryforward -45,417 9,019 0 -36,398 152,430 37,754 1,549 191,733 There are no deferred tax assets not recognized in the balance. Note 17 – Borrowings Amounts in DKK 1000s 2021 2020 Credit institutions, nominal 920,757 1,318,637 Market value adjustments -6,110 -7,787 914,647 1,310,850 The liabilities are thus included in the balance sheet: Credit institutions, long-term 894,301 1,259,880 Credit institutions, short-term 20,347 50,970 914,647 1,310,850 The Group's loans and credits are distributed as per 31 December as follows: Liabilities recognized at fair value Currency Rate type Expiry date 2021 2020 Convertible bonds DKK Interest-free 11-15 years 11,335 11,335 11,335 11,335 Market value adjustments -6,110 -7,787 Carrying amount 5,225 3,548 Liabilities recognized at amortized cost Currency Rate type Expiry date 2021 2020 Banks Debt DKK Fixed 2-5 years 4,985 255,260 Mortgage Debt DKK Variable 2-5 years 43,402 0 Mortgage Debt DKK Variable 6-10 years 35,987 143,986 Mortgage Debt DKK Variable 11-15 years 593,362 97,372 Mortgage Debt DKK Variable 16-20 years 231,685 810,684 Park Street | Notes to Park Street A/S Financial Statements 86 Carrying amount 909,420 1,307,302 The nominal amounts stated in the tables represent the amount that Park Street will repay under the loan agreements by the end of these agreements. Fixed interest loans stated in the tables indicate that a fixed rate applies until the loans' maturity date or until a new negotiation is made with the individual bank. Variable interest rates expressed in the tables indicate that the loans have interest rates that are regularly adjusted over the term of the loans due to fluctuations in market interest rates. The evolution of the long and short term liabilities with credit institutions is specified follows: Amounts in DKK 1000s 2021 2020 Non-current financial liabilities 1,259,880 1,383,922 Current financial liabilities 50,970 52,152 Financial liabilities with credit institutions at 1 January 1,310,850 1,436,074 Repayment of liabilities to credit institutions -397,881 -47,714 Repayment of debt from disposal of assets 0 -77,510 Fair value adjustment of Debt 1,678 0 Financial liabilities with credit institutions at 31 December 914,647 1,310,850 Non-current financial liabilities 894,301 1,259,880 Current financial liabilities 20,347 50,970 Total financial liabilities with credit institutions at 31 December 914,647 1,310,850 Determining the fair value of debt to credit institutions Information on Group’s financial loan agreements, mortgage debt and convertible bonds is disclosed in note 27 of the consolidated financial state- ments. Information on estimates and judgments related to the determination of fair value of financial liabilities is disclosed in note 1 of the Consoli- dated Financial Statements. As stated in these notes mortgage and bank debt have been recognized at amortised cost in 2021. No reversal of fair value adjustments in 2021 and 2020. Zero-coupon bonds (former Convertible bonds) See note 25 in the Consolidated Financial Statements. Note 18 – Contingent assets and liabilities Pledges and guarantees The nominal pledge for the bank debt and mortgage debt given by credit institutions per December 31, 2021 amount a total of DKK 909 million (31 December 2020: DKK 1,778 million), the nominal value of the loans amounts a total of DKK 909 million (December 31, 2020: DKK 1,307 million) in the group's investment properties and domiciles with a book value totalling DKK 1,597 million (31 December 2020: DKK 2,327 million). The nominal pledge for the bank debt and mortgage debt given by credit institutions per December 31, 2021 amount a total of DKK 7.7 million (31 December 2020: DKK 8.0 million), in the group's deposited mortgage deeds with a book value totalling DKK 7.7 million (31 December 2020: DKK 8.0 million). Litigations and disputes In connection with the sale of a property (building rights) in 2016, it was agreed that if, in connection with the buyer's settlement there is a proof that the property is contaminated, Park Street must reimburse the costs that may be needed to get property released for the buyer's purpose. Park Street consider the agreement as a contingent liability as stated in Note 26 of the consolidated financial statements. No additional significant litigations and disputes are acknowledged by the Group at December 31, 2021 other than the ones indicated in Note 26 of the consolidated financial statements. Park Street | Notes to Park Street A/S Financial Statements 87 Conditional debt relief and contingencies In connection with the sale of a property in 2014, Park Street has been subject to a surcharge for the property if the purchaser on the site before 1 January 2024 obtains more building rights than assumed at the conclusion of the transaction. The additional price amounts to DKK 2,000 for each building rights. Additional building plans will require a change of the local plan for the area in which the property in question is located. Park Street is not aware of any plans to change the local plan in question, for this reason Park Street does not consider the potential additional price as a contingent asset. Contingent assets As part of the sales agreement of the property sold in 2018, Park Street and the buyer have agreed that Park Street is entitled to obtain an addi- tional supplement of DKK 1 million if the buyer completer a development project of more than 5,000 square meters within 5 years from the date of acquisition; the Company has decided not to recognize the contingent asset in the balance as at December 31, 2021. Lease commitments There are operating leases for cars rental and printers. Amounts in DKK 1000s 2021 2020 Within 1 year from the balance sheet date 1 2 Between 1 and 5 years from the balance sheet date 5 3 After 5 years from the balance sheet date 0 0 Operating lease obligations at 31 December 6 5 Amounts in DKK 1000s Minimum lease payments recognized in the profit and loss account for the year 130 242 Note 19 – Financial risks and the use of derivative financial instruments Amounts in DKK 1000s 2021 2020 Mortgages and debentures 7,671 8,000 Intercompany loan 157,883 157,548 Financial assets measured at amortized cost 165,554 165,548 Receivables 36,038 18,710 Cash and equivalents 152,652 13,321 Loan and receivables 188,690 32,031 Credit institutions 5,226 3,548 Financial liabilities measured at fair value through profit or loss 5,226 3,548 Credit institutions 909,421 1,307,301 Deposits 29,521 31,102 Accounts payable 11,860 5,175 Other Debts 7,454 9,674 Financial liabilities measured at amortized cost 958,256 1,353,253 Risk management policy Park Street | Notes to Park Street A/S Financial Statements 88 The financial management of the Group is geared towards stabilization and optimization of the Group's operations, while at minimizing the Group's financial risk exposure. It is part of the Group's policy not to conduct speculative transactions by active use of financial instruments. The group is due to its activities exposed to various financial risks, including liquidity risk, market risks (primarily interest rate risk) and credit risk. Liquidity risk Park Street’s liquidity risk consists on not being able to make regular payments and not being able to provide sufficient liquidity to cover the financ- ing costs, capital repayment obligations and capital investments. Lack of liquidity may arise from insufficient cash resources and may be adversely affected by missed payments from Park Street tenants, increased vacancy, repayment of deposits, divestments, unexpected costs and investment needs. Lack of liquidity may also arise from default of loans signed and in connection with refinancing when existing loan agreements expire or are terminated. Cash reserves total at December 31, 2021 DKK 152.6 million (31 December 2020: DKK 13.3 million). Park Street forecasts that current and generated liquidity is sufficient to carry out the group's planned activities throughout 2022. Maturity of financial liabilities is specified as follows: Amounts in DKK 1000s Carry forward balance Contractual cash flows 0 - 1 Years 2 - 3 Years 4 - 5 Years After 5 Years 2021 Non-derivative financial instruments Credit institutions 914,647 998,587 31,338 62,675 62,796 841,778 Trade payables 11,860 11,860 0 0 0 0 Deposits 29,521 29,521 25,108 3,634 97 682 Other debts 7,454 7,454 7,454 0 0 0 Total 963,482 1,047,422 63,900 66,309 62,893 842,460 2020 Non-derivative financial instruments Credit institutions 1,310,850 1,453,565 68,661 317,705 108,160 959,039 Trade payables 5,175 5,175 5,175 0 0 0 Deposits 31,102 31,102 24,166 3,063 3,389 484 Other debts 9,674 9,674 9,674 0 0 0 Total 1,356,802 1,499,517 107,677 320,768 111,549 959,523 Interest rate risk Park Street is as a result of its financing activities in significant extent exposed to interest rate fluctuations. The interest rate risk is therefore an essential element in the overall assessment of the Group's financial situation. The interest rate risk as of December 31, 2021 primarily relate to the following: Fluctuations in market interest rates on mortgages with variable rates (Cibor6, F2, F3, F5). Renegotiation of the margin rate applied on the mortgage loans. Renegotiation of fixed interest rate of bank debt associated with the extension of loans / terms. Fixed rate includes loans, which applies a fixed rate until the loans' maturity date, to other agreed point in time or until a renegotiation is made with the individual bank. Park Street’s major interest rate risk is the risk that the financial creditors on short notice increase terms of interest and margin rates. In this situation, the level of interest and contribution rates depend on negotiations with the financial institutions. The Group's loan portfolio is continu- ously monitored with a view to optimizing the group's exposure to interest rate risks. Park Street at December 31, 2021 does not have financial instruments for interest rate hedging, and the group has limited opportunities to influence the interest rate risk in the current financial situation. Park Street | Notes to Park Street A/S Financial Statements 89 Group's nominal financial debt is specified as follows, based on the type of interest rate that is linked to individual loans: Type of loan Nominal (DKK million) * Weighted interest rate (per annum) At December 31, 2021: Mortgage debt Cibor3 0 0.00% Mortgage debt Cibor6 139 2.08% Mortgage debt F2 46 2.54% Mortgage debt F3 214 0.83% Mortgage debt F5 505 0.84% Bank debt etc. Fixed 5 0.00% Others Interest-free 5 0.00% 914 1.11% At December 31, 2020: Mortgage debt Cibor6 208 1.77% Mortgage debt F2 49 2.64% Mortgage debt F3 289 0.90% Mortgage debt F5 506 1.27% Banks and other payables. Fixed 254 2.54% Others Interest-free 4 0.00% 1,310 1.57% The calculated weighted interest rate for all Park Street loans are at 31 December 2021 1.11% per annum, and is based on the latest confirmed interest rates. The corresponding calculated weighted rate at 31 December, 2020 was 1.57% per annum. Breakdown by maturity until the next date of interest rate adjustment distributes the Group's loans as follows (as of Dec. 31): Amounts in DKK 1000s 2021 2020 Within six months 193 208 Between 6 and 12 months 0 0 Between 1 and 2 years 212 299 Between 2 and 5 years 505 799 After 5 years 5 4 914 1,310 The interest rate adjustment date for fixed-rate and interest-free loans is included in the above table at the time of the renegotiation of the maturity and / or terms of the loans or where existing confirmations on a given interest rate expire for a period. Interest rate risk from Park Street’s view can be presented in the following two divisions: Variable market interest rates: Risks associated with fluctuations in market interest rates, ie. on loans where interest rate adjustment takes place at defined times based on market fluctuations. This applies to mortgage loans with variable interest rates. Interest, etc. on all loans: Risks associated with fluctuations in interest rates on all loans. In addition to the above fluctuations in market rates, this includes the renegotiation of contribution rates at mortgage banks and renegotiation of loan terms with bank creditors. The hypothetical effect on the results and equity after tax as a result of 1 percentage point increase in interest rates (ex. Fair value adjustments) are illustrated in the following table: Park Street | Notes to Park Street A/S Financial Statements 90 Amounts in DKK 1000s 2021 2020 Variable Interest rate loans: Effect on income statement -11.3 -13.0 Effect on equity -11.3 -13.0 On loans from credit institutions, with ongoing interest rate adjustments resulting from changes in market interest rates, illustrates the table above that the hypothetical effect on net income and equity as a result of one percentage point increase in interest rates amounts to DKK -11.3 million per annum (2020: DKK -13.0 million). Currency risk The group exposure is very limited to changes in currency rates. Credit risk The Group's credit risk is primarily related to: Lease receivables Receivables from the sale of properties Receivables form mortgages The maximum credit risk for financial assets is reflected in the accounting values of the balance sheet, and taking into account securities received. Risks concerning to rental receivables are limited to Park Street’s options to deduct payments from deposits and termination of the covered leases. Credit risk on receivables arising from the sale of properties is limited, as the transactions are always subject to payment of purchase price and deposit of the purchase price. With mortgage deeds, the Group has an usual debtor risk, which is reduced by mortgages on properties. In order to minimize the risk of loss of receivable rent, the tenants' ability to pay prior to entering into leases is assessed to the extent that it is relevant. In addition, there is usually a requirement for a cash deposit, a guarantee and / or prepaid rent. However, if a tenant is unable to pay, it may result in loss as well as reduced income due to rental allowance upon relocation, lower future rental income and any additional costs incurred in connection with refurbishment etc. Credit risk on receivables at December 31, 2021 is further described in note 20 of the consolidated financial statements. Group’s Cash and cash equivalents consists primarily of deposits in reputable banks. The group believes that there is no significant credit risk associated with the cash. Deposits in banks are labelled at variable interest rate. Financial liabilities with credit institutions and fair value Group’s mortgage debt and bank debt is classified as amortized cost. Fair value of loans measured at amortised cost amount to DKK 909,420. Fair value has been determined as the present value of the contractual cash flows discounted at a rate reflecting the current borrowing rate. Due to the fact that the terms of all loans were renegotiated in 2017, fair value of all floating rate loans is considered to be equal to their carrying aomunt. Based on a recent transaction, the fair value measurement is considered a level 2 measurement. The fair value of zero-coupon debt is established based on the fair value estimated by an independent reviewer (estimated rate of 46.09 at De- cember 31, 2021). The Group's financial assets and liabilities measured at fair value are classified on the following 3 levels in the fair value hierarchy: Level 1: Based on listed prices (non-adjusted) on active markets for identical assets or liabilities. Level 2: Based on inputs other than listed prices that are observable for the asset or liability, either direct (as prices) or indirect (derived from prices). Level 3: Based on data that is not observable in the market. Park Street | Notes to Park Street A/S Financial Statements 91 Amounts in DKK 1000s Carry forward balance Level 1 Level 2 Level 3 2021 Mortgages and debentures 7,671 0 7,671 0 Intercompany loan 0 0 Total financial assets 7,671 0 7,671 0 Credit institutions 5,226 0 0 5,226 Total financial liabilities 5,226 0 0 5,226 2020 Mortgages and debentures 8,000 0 8,000 0 Intercompany loan 157,548 157,548 Total financial assets 165,548 0 165,548 0 Credit institutions 3,548 0 0 3,548 Total financial liabilities 3,548 0 0 3,548 It is the Group's policy to recognise transfers between the different levels from the time at which an event or change in circumstances entails a change in the classifications. No transfers were made between levels 1 and 2 in the accounting period. When calculating the fair value of the Group's liabilities in accordance with level 3 of the fair value hierarchy, a correction is made for the Group's own credit rating, taking into account the legal status of the liabilities, and the security in the assets measured at fair value. Consequently, no direct assumptions of discount factors, etc. are included when measuring liabilities to credit institutions in accordance with level 3 of the fair value hierar- chy. The table below shows the change in liabilities to credit institutions measured at fair value in the balance sheet based on valuation methods in which significant inputs are not based on observable market data (level 3): Amounts in DKK 1000s 2021 2020 Carrying amount per. 1st of January 3,548 3,548 Gains / losses in the income statement 1,678 0 Balance at 31st of December 5,226 3,548 Gain / loss in the income statement for liabilities held at 31st of December 0 Gains/losses concerning credit institutions measured at fair value are included in the item 'Adjustment to fair value, net' and in the item 'Special items' in the income statement of the consolidated financial statements. Liabilities to credit institutions measured at fair value are transferred to/from level 3 in the fair value hierarchy depending on whether the fair value of the loans contains a correction for the Group's own credit rating. For financial instruments that are not measured at fair value, the book value is assessed as being a reasonable approximation of fair value. Note 20 – Changes in other working capital Amounts in DKK 1000s 2021 2020 Change in receivables -17,327 -4,903 Change in deposit 1,581 -8,557 Change in trade payables and other liabilities -6,685 2,910 Change in total working capital -22,431 -10,550 Note 21 – Related parties Park Street | Notes to Park Street A/S Financial Statements 92 Park Street Asset Management Ltd. (London, England) has controlling influence in Park Street A/S by virtue of its shareholding of 92.14% of shares and votes in Park Street A/S. See note 5 in the Consolidated annual report, where the remuneration of Directors and Board of Park Street appears. The Company has additionally had the following transactions between Park Street and related parties: Amounts in DKK 1000s 2021 2020 Other related parties Intangible assets 0 3,249 Software expenses 2,234 0 There have been no other transactions, etc. with related parties during the period. Park Street | Notes to Park Street A/S Financial Statements 93 Note 22 – Accounting policies Park Street A/S applies the same accounting policies as stated in Note 33 on the consolidated financial statements, in addition the following note is applicable for the parent company: Investment in subsidiaries Investments in subsidiaries are recognised and measured in the financial statements of the parent company under the equity method. On acquisi- tion of subsidiaries, the difference between cost of acquisition and net asset value of the entity acquired is determined at the date of acquisition after the individual assets and liabilities having been adjusted to fair value (the acquisition method). The item ”Income (loss) from investment in subsidiaries” in the income statement includes the proportionate share of the profit after tax of the subsidiary. The item ”Investments in subsidiaries” in the balance sheet includes the proportionate ownership share of the net asset value of the entities calculated under the accounting policies of the parent company with deduction or addition of unrealised intercompany profits or losses and with addition of any remaining value of the positive differences (goodwill). Subsidiaries with a negative net assets value are measured at DKK 0, and any receivables from these are written down by the parent company’s share of the negative net asset value, if impaired. Any legal or constructive obligation of the parent company to cover the negative balance of the subsidiaries is recognised as provisions. The total net revaluation of investments in subsidiaries is transferred upon distribution of profit to ” Re- serve for net revaluation” under equity. Gains and losses on disposals or winding up of subsidiaries are calculated as the difference between the sales value or cost of winding up and the carrying amount of the net assets at the date of acquisition including goodwill and expected loss of dis- posal or winding up. The gains or losses are included in the income statement. Financial Ratios The financial ratios have been calculated as follows: Return on property portfolio (% p.a.): Gross profit x 100 / Fair value of investment and domicile properties Average loan rate (% p.a.): Financial items x 100 / Credit institutions Return margin on property portfolio (% p.a.): Return on property portfolio (% p.a.) - Average loan rate Return on equity (%): Profit for the period / Total equity Equity ratio (%): Total equity / Total assets Net asset value per share, end of period (DKK): Total equity / Share capital Earnings per share (avg. Number of shares) (DKK): Profit for the period / Average number of shares Earnings per share, end of period (DKK): Profit for the period / Number of own shares, end period Result of continuing activities per. share (DKK): Profit for the period / Number of own shares, end period Dividend yield (%): Dividend per share / Share price, end of period Price/net asset value, end of period: Share price / Net asset value per share, end of period Cash flow from operations per share (DKK): Cash flows from operations / Diluted average number of shares in circulation Park Street | Property Overview 94 PROPERTY OVERVIEW Park Street Group owns at 31 December 2021, 54 properties. # Strategy Property Type Address ZIP City 1 Spark Office Office 26, Hejrevej 2400 København 2 30, Hejrevej 2400 København 3 18, Ørnevej 2400 København 4 3, Femøvej 4700 Næstved 5 6, Toldbuen 4700 Næstved 6 9, Omøvej 4700 Næstved 7 23, Hersegade 4000 Roskilde 8 3, Femøvej 4700 Næstved 9 2, Dannebrogsgade 5000 Odense 10 275, Svendborgvej 5260 Odense 11 1E, Vilhelmskildevej 5700 Svendborg 12 Birkemose Alle 21 6000 Kolding 13 23, Birkemose Allé 6000 Kolding 14 9, Birkemosevej 6000 Kolding 15 22, Stagehøjvej 8600 Silkeborg 16 Banegårdsvej 2600 Glostrup 17 Spark Retail Retail 1, Lilleholm 2670 Greve 18 20, Prøvestensvej 3000 Helsingør 19 2, L. C. Worsøesvej 4300 Holbæk 20 27, Immerkær 2650 Hvidovre 21 3, Banetorvet 3450 Lillerød 22 10, Dyssegårdsvej 4700 Næstved 23 13, Nørregade 4100 Ringsted 24 27, Nørregade 4100 Ringsted 25 8, Ro's Have 4000 Roskilde 26 11, Ro's Have 4000 Roskilde 27 13, Ro's Have 4000 Roskilde 28 1, Stenbukken 9200 Aalborg 29 102, Silkeborgvej 7400 Herning 30 2A, Engdahlsvej 7400 Herning 31 19A, Albuen 6000 Kolding 32 Århusvej 8960 Randers 33 60, Åkirkebyvej 3700 Rønne 34 78, Zahrtmannsvej 3700 Rønne 35 Storage 78, Vordingborgvej 4700 Næstved 36 78, Vordingborgvej 4700 Næstved 37 7, Blegdammen 4700 Næstved 38 Pulse Residential 29, Tåsingegade 2100 København 39 21, Nørregade 4100 Ringsted 40 31, Nørregade 4100 Ringsted 41 1, Møllergade 5700 Svendborg 42 33, Jernbanegade 6000 Kolding 43 1, Helligkorsgade 6000 Kolding 44 30, Østergade 7600 Struer 45 34A, Dæmningen 7100 Vejle Park Street | Property Overview 95 # Strategy Property Type Address ZIP City 46 Residential - Project 8, Hejrevej 2400 København 47 4, Kirsebærgården 3450 Lillerød 48 Skråningshusene 3070 Snekkersten 49 2, Selsmosevej 2630 Taastrup 50 Retail 12, Sjællandsgade 7100 Vejle 51 Parking J.C.Christensens Gade 2300 København 52 Pulse Hotel Hotel 13, Algade 4000 Roskilde 53 6, Marbækvej 2750 Ballerup 54 Sold Retail Loftbrovej 17, Nørresundby 9400 Aalborg Annual reportAuditor's report on audited financial statementsParsePort XBRL Converter2021-01-012021-12-312020-01-012020-12-31Reporting class Dhttp://www.psnas.com/index.php/corporate-governance-statement/213800VGJC18MRKMZC3312932502Park Street A/SSvanevej 122400 CopenhagenOpinionBasis for Opinion213800VGJC18MRKMZC332021-01-012021-12-31cmn:ConsolidatedMember213800VGJC18MRKMZC332021-01-012021-12-31213800VGJC18MRKMZC332020-01-012020-12-31213800VGJC18MRKMZC332021-12-31213800VGJC18MRKMZC332020-12-31213800VGJC18MRKMZC332020-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332021-01-012021-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332021-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332020-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332021-01-012021-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332021-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332020-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332021-01-012021-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332021-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332020-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332021-01-012021-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332021-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332019-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332020-01-012020-12-31ifrs-full:IssuedCapitalMember213800VGJC18MRKMZC332019-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332020-01-012020-12-31ifrs-full:RevaluationSurplusMember213800VGJC18MRKMZC332019-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332020-01-012020-12-31ifrs-full:RetainedEarningsMember213800VGJC18MRKMZC332019-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332020-01-012020-12-31ifrs-full:SharePremiumMember213800VGJC18MRKMZC332019-12-31213800VGJC18MRKMZC332020-01-012020-12-31cmn:ConsolidatedMember213800VGJC18MRKMZC332021-01-012021-12-311cmn:ConsolidatedMember213800VGJC18MRKMZC332021-01-012021-12-311cmn:ConsolidatedMember213800VGJC18MRKMZC332021-01-012021-12-311cmn:ConsolidatedMember213800VGJC18MRKMZC332021-01-012021-12-312cmn:ConsolidatedMember213800VGJC18MRKMZC332021-01-012021-12-313cmn:ConsolidatedMember213800VGJC18MRKMZC332021-01-012021-12-314cmn:ConsolidatedMember213800VGJC18MRKMZC332021-01-012021-12-315cmn:ConsolidatedMember213800VGJC18MRKMZC332021-01-012021-12-312cmn:ConsolidatedMemberiso4217:DKKiso4217:DKKxbrli:sharesxbrli:pure
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